JP Morgan Predicts Crude Oil Prices May Fall to $30 by FY27-End

JP Morgan Chase, a leading global investment bank, has forecasted that Brent crude oil prices may plummet into the low $30 per barrel range by the end of the financial year 2027. This prediction is primarily attributed to a significant oversupply in the oil market, which is anticipated to outstrip demand growth substantially. The bank's latest analysis indicates that although global oil consumption is expected to rise, particularly in emerging markets, the pace of supply growth—especially from non-OPEC producers—will likely exert downward pressure on prices.

Supply and Demand Dynamics

According to JP Morgan’s projections, global oil demand is set to increase by approximately 0.9 million barrels per day (mbd) in 2025, leading to an overall consumption of around 105.5 mbd. This growth trend is expected to maintain momentum, with a further acceleration to 1.2 mbd in 2027. However, JP Morgan argues that this increase in demand will not keep pace with supply, which is estimated to expand at nearly three times the rate of demand in both 2025 and 2026.

A significant factor contributing to this supply imbalance is the resurgence of production from non-OPEC countries, particularly the United States, Brazil, and Guyana. JP Morgan notes that half of the anticipated supply growth through 2027 will originate from outside the OPEC+ alliance, fuelled by robust offshore developments and continued productivity gains from shale oil production.

Offshore Production Gains

Offshore oil production, once seen as a capital-intensive sector, has evolved into a low-cost growth engine. The bank predicts offshore output will increase by 0.5 mbd in 2025, 0.9 mbd in 2026, and an additional 0.4 mbd in 2027. With the majority of future Floating Production Storage and Offloading (FPSO) units already sanctioned through 2029, JP Morgan highlights that forecasts for new offshore barrels are exceptionally strong, providing clarity on future production capabilities.

Shale Oil Flexibility

Shale oil remains a flexible component of global oil supply. While growth in US shale production is slowing, improvements in efficiency and capital allocation continue to support high output levels. Furthermore, Argentina’s Vaca Muerta shale formation has emerged as a significant low-cost production area, bolstered by advancing export infrastructure. In 2025, global shale production is anticipated to rise by 0.8 mbd, with expectations of further growth in subsequent years as long as oil prices remain stable in the mid-$50 range.

Inventory Build and Market Implications

The ongoing increase in supply has resulted in a substantial build-up of global oil inventories, with a reported increase of 1.5 mbd this year alone. JP Morgan estimates that if market conditions do not change, the surplus could widen to 2.8 mbd in 2026 and 2.7 mbd in 2027. This oversupply scenario suggests that Brent crude prices could potentially dip below $60 in 2026 and fall further into the low $50s by the end of that year, ultimately averaging around $42 in 2027 and potentially sliding into the $30 range.

While JP Morgan acknowledges that such a drastic price decline might not fully materialise, the firm maintains its forecast of $58 for Brent crude in 2026. Current trading prices for Brent are just above $60 per barrel, indicating a precarious balance in the oil market as producers face tough choices ahead.

Economic Implications

For countries heavily reliant on oil imports, such as India, a drop in crude prices could bring significant economic relief by easing inflation, reducing import expenditures, and enhancing external balances. However, lower prices could also create financial stress for higher-cost producers, particularly in the US shale sector, where many operations become unprofitable below $40 per barrel.

JP Morgan’s outlook serves as a reminder that without coordinated production management or unexpected demand increases, the global oil market may face a prolonged period of low prices. The future trajectory of oil prices will be influenced by OPEC+ policy decisions, shale production patterns, inventory levels, and overall global economic conditions.