① JPMorgan oil strategists believe that global oil supply and inventories have continued to decline significantly, yet oil prices remain at relatively low levels, which may indicate a flaw in market calculations; ② Global supply disruptions have reached 13.7 million barrels per day, accounting for nearly 15% of global demand, with most spare capacity concentrated in the Persian Gulf region, where the closure of the Strait of Hormuz has reduced exports to near zero.
Cailian Press, April 28 (edited by Liu Rui) Nine weeks after the outbreak of the Iran war, global oil supply and inventories have continued to decline significantly, but oil prices have remained at relatively low levels, far below historical highs.
JPMorgan oil strategists believe this stable market situation may change soon because 'there is likely an issue in the market's calculations.'
The gap between oil supply and demand persists.
In commodity markets, the mathematical calculation for balancing the market is straightforward—supply plus inventory drawdown equals consumption plus inventory buildup. Simply put, it involves calculating the difference between oil production capacity, oil inventories, and oil demand.
Natasha Kaneva, Head of Global Commodities Strategy at JPMorgan, and her team wrote:
"Commodity markets are always forced to reach equilibrium: the market must clear... If production continues to fall short of demand, this (supply-demand) gap cannot persist indefinitely."
According to JPMorgan data, as of the end of April, global supply disruptions had reached 13.7 million barrels per day, accounting for nearly 15% of global demand, which is approximately 100 million barrels per day.
In volatile markets, there are limited tools available for adjustment. The most common response is to utilize spare capacity, with producers increasing output to compensate for losses.
However, most of the current global spare capacity is concentrated in the Persian Gulf region, where exports have dropped to near zero due to the closure of the Strait of Hormuz.
Strategists at JPMorgan noted that in the United States, even if an additional one million barrels per day of production capacity is added, it would still take six to twelve months for it to enter the market.
Inventories are already near historically low levels.
The second major tool for market adjustment is inventory—but this measure has already been almost fully utilized.
In April this year, countries tapped into strategic reserves to prevent sharp fluctuations in oil prices, and inventory reductions have reached an 'exceptional' level of 7.1 million barrels per day.
In March 2026, the International Energy Agency (IEA) coordinated a record release of 400 million barrels of oil inventories from its 32 member countries. According to research by Goldman Sachs, even if the Strait of Hormuz reopens by the end of April, global oil inventories could fall to historic lows.
However, despite constrained production capacity in the oil market and inventories nearing historical lows, oil prices have not reached their all-time highs—a situation that is clearly anomalous.
Futures prices are significantly lower than spot prices.
Since the outbreak of the Iran conflict, international benchmark Brent crude futures and the U.S. benchmark WTI crude futures have risen by approximately 40% cumulatively.
However, even the intraday peak during the conflict—Brent crude at $118.35 per barrel and WTI crude at $112.95 per barrel—contract prices remain about $20 per barrel below the record levels seen in 2008.
This may be due to factors such as reduced risk premiums in the oil market after the U.S. and Iran reached a ceasefire agreement, significant inventory drawdowns, and historically strong declines in demand, all of which have dampened the rise in futures prices.
However, futures contracts fall far short of accurately reflecting the full cost of purchasing oil in the spot market. In recent weeks, spot prices for near-term delivery in Asian markets have surged well above the futures benchmark, with Singapore spot crude hitting $210 per barrel and Sri Lanka even reaching a staggering $286 per barrel.
Demand has dropped significantly.
However, demand, as the last line of defense against skyrocketing oil prices, has begun to show signs of weakening.
According to JPMorgan, global oil demand is expected to decline by an average of 4.3 million barrels per day in April, nearly double the peak demand reduction during the 2008 global financial crisis—when oil prices reached record highs.
However, JPMorgan strategists noted: 'Surprisingly, these (demand) losses occurred despite prices not being particularly extreme by historical standards.'
Is the surge in oil prices still unstoppable?
Strategists at several major Wall Street banks have stated that if conditions in the Middle East do not improve, the situation across the market could change rapidly.
Over the weekend, Goldman Sachs’ oil strategists raised their price targets for Brent crude and WTI crude in the fourth quarter to $90 and $83 per barrel, respectively, up from the previous forecasts of $80 and $75 per barrel, on the assumption that oil production in the Persian Gulf can return to normal by the end of June.
Goldman Sachs strategists wrote: 'The economic risks are greater than our forecasts based solely on crude oil fundamentals, due to significant upside risks in oil prices, exceptionally high refined product prices, risks of product shortages, and the unprecedented scale of the shock.'
Citi also predicted that oil prices may climb further, noting that if supply disruptions persist through June, Brent crude could reach $150 per barrel, with the fourth-quarter average potentially hitting $100.