CHENNAI: Crude oil could be headed for a sharp and prolonged downturn, with prices potentially slipping into the mid-to-high $30-per-barrel range by the end of FY27, according to JP Morgan’s latest commodities outlook. The global investment bank warns that a widening supply surplus, driven mainly by strong non-OPEC+ production, could overwhelm demand growth and depress prices unless major producers intervene with deeper output cuts.
JP Morgan’s projection marks one of the most bearish long-term assessments among global financial institutions, especially at a time when Brent crude currently trades around the low-60s. The bank emphasises that the drop into the $30s is not a worst-case shock scenario, but a realistic outcome under present production trajectories.
At the heart of this forecast is a persistent supply glut expected to build over the next two years. The bank anticipates that non-OPEC+ producers — particularly the US. shale sector, Brazil, and Guyana — will continue expanding output at a pace that far outstrips incremental global demand. JP Morgan estimates that the surplus could reach close to 3 million barrels per day by 2026–27 if OPEC+ holds its current production stance. The result, it argues, would be sustained downward pressure as global inventories swell and storage buffers rise.
Demand, meanwhile, is set to grow but at a considerably slower rate than supply. The bank points to cooling economic momentum in major consuming markets, a gradual structural shift toward renewables, and efficiency gains that chip away at long-term oil intensity. Even in emerging economies, demand growth is expected to moderate compared with earlier cycles.
The outlook also assumes an absence of major geopolitical disruptions — a critical caveat. While oil markets have historically been vulnerable to sudden supply shocks, JP Morgan notes that without such events, the supply-demand mismatch is severe enough to push prices much lower than current levels.
A fall into the $30s would almost certainly force higher-cost producers, especially certain U.S. shale operators, to curb operations or delay new investments. Many shale wells become unprofitable below $40, raising the likelihood of a wave of output rationalisation if prices remain depressed. This, in turn, could eventually stabilise the market, but not before a period of financial stress for upstream companies.
For major oil-importing economies such as India, however, a move into the $30s would provide significant relief. Lower crude prices would help ease inflationary pressure, reduce the import bill, strengthen the external balance, and free fiscal space. Downstream industries — from airlines to chemicals to transport — would also benefit from cheaper energy inputs.
The broader geopolitical implications would be complex. While consumer economies would welcome lower prices, oil-exporting nations could face tighter fiscal conditions and budgetary strain, potentially influencing political priorities and economic stability across parts of West Asia, Africa, and Latin America.
JP Morgan’s projection is not presented as a baseline but as a scenario built around current trajectories — a reminder that without coordinated supply management or unexpected demand strength, the global oil market may be heading toward a period of prolonged softness. The coming quarters will be shaped heavily by OPEC+ policy decisions, shale drilling patterns, inventory trends, and global growth signals. For now, the bank’s warning stands out as one of the clearest indications that the era of structurally higher oil prices may be fading faster than expected.