JP Morgan: Severe supply surplus may push oil prices down to $30 by 2027

JP Morgan's latest forecast shows that due to severe supply overhang in the market, the international oil benchmark Brent crude oil price could fall to the range of $30 per barrel by 2027. This long-term outlook highlights the immense supply-demand imbalance pressures facing the global energy market.

Meanwhile, Goldman Sachs has released a report advising investors to short oil immediately. The bank expects that due to a daily supply surplus of 2 million barrels, the average price of the U.S. benchmark WTI crude oil will drop to $53 per barrel in 2026. Since the beginning of this year, Brent crude oil prices have fallen by 14%, trading around $62.59 per barrel in early Monday trading.

Analysis from major investment banks indicates that large-scale supplies from OPEC+ and non-OPEC oil-producing countries in the Americas are continuing to flood the market. Additionally, the potential easing of geopolitical tensions has further intensified downward pressure on prices. As peace negotiations between the U.S. and Ukraine progress in Geneva, the market anticipates that if a peace agreement is reached, sanctions and restrictions against Russia may be relaxed, further suppressing energy prices.

Although some analysts and investment banks do not currently believe that oil prices will fall below $40, the market generally expects that before this "huge wave of supply" is fully digested, oil prices will face continued downward risks in the short and medium term.

Goldman Sachs Advises to Short Immediately

According to Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, who spoke to CNBC last week, oil prices are on a trajectory for further decline, and investors should "short oil now."

Goldman Sachs expects that as the market faces a daily supply surplus of 2 million barrels next year, oil prices will further decline from current levels. The bank predicts that by 2026, the average price of WTI crude oil will drop to $53 per barrel. This forecast is based on strong supply growth expectations from current OPEC+ oil-producing countries and non-OPEC oil-producing countries in the Americas, which will continue to dominate market trends in the coming years.

Supply-Demand Rebalancing Timeline

Regarding when the market can digest the current supply surplus, major institutions have provided different timelines. According to JP Morgan's forecast posted on X (formerly Twitter), Brent crude oil prices could drop to the $30 range by 2027 due to the supply surplus potentially overwhelming the market.

In contrast, Goldman Sachs believes the market is expected to rebalance by 2027. Daan Struyven pointed out that 2026 will be the "last wave of large-scale oil supply" that the market must digest. This means that after experiencing this round of supply shock from oil-producing countries on both sides of the Atlantic, the oil market's supply-demand structure is expected to gradually return to normal by 2027. Nevertheless, analysts generally acknowledge that even if prices do not fall below $40, the downward trend in oil prices remains evident.

Geopolitical Easing Pressures Oil Prices

In addition to the supply-demand fundamentals, changes in geopolitical factors are also affecting market sentiment. The U.S. and Ukraine held what both sides described as "productive" talks in Geneva on Sunday and agreed to continue intensive work on the "refined" peace plan proposed by the U.S. last week Analysts point out that the easing of the situation in Ukraine may have a negative impact on energy prices. If a peace agreement is reached, some sanctions and restrictions against Russia may be lifted or relaxed, allowing more Russian energy supplies to smoothly re-enter the global market, thereby further increasing supply pressure on top of the existing oversupply. Currently, the oil market is closely monitoring the latest developments in the relevant negotiations