J.P. Morgan on Wednesday cut its Brent crude oil price forecast for the second half of 2026, citing a weaker drawdown in commercial inventories and lower oil demand than previously expected.
The bank now forecasts Brent to average $86 per barrel in the third quarter and $80 per barrel in the fourth quarter, with prices falling to $78 per barrel by the end of 2026.
According to a J.P. Morgan research note, OECD commercial inventory drawdowns were lower than expected, while demand losses exceeded forecasts, reducing upward pressure on oil prices.
The bank noted that the market rebalanced due to a significantly different combination of demand losses and inventory drawdowns than originally anticipated. According to the bank, oil flows currently stand at around 8.6 million barrels per day (bpd), reaching an average of 6.3 million bpd in June, significantly higher than April and May levels.
According to J.P. Morgan, private operators have largely abandoned their plans to draw down oil inventories and have relied almost entirely on the release of oil from government strategic reserves to maintain refinery operations.
In its second-half forecast, the bank expects OECD inventories to decline by a further 50 million bpd between April and July.
The bank also added that a production cut will likely be necessary in early 2027, following a peak in late 2026, given the scale of the projected supply surplus in the fourth quarter of 2026 and the first half of 2027.