Crude oil prices could fall below $30 by the end of FY27, JP Morgan says. This is why

In a bold forecast for energy markets, JP Morgan has forecast that Brent crude could fall to the $30s by the end of FY27, driven by a widening global supply glut that easily outpaces demand growth. The investment bank’s latest outlook suggests that even if oil consumption rises steadily over the next three years, supply demand – especially from non-OPEC+ producers – will overwhelm the market and weigh heavily on prices. If successful, it could be a big boost for Indian markets, given the country’s heavy dependence on oil imports.Global oil demand is expected to increase by 0.9 million per day by 2025, bringing total consumption to 105.5 million per day. Growth is expected to remain robust through 2026 and accelerate to 1.2 million per day by 2027. Still, this steady increase is unlikely to keep pace with supply, which JP Morgan estimates will grow almost three times as fast as demand in both 2025 and 2026. Although the pace of supply expansion slows sharply in 2027, it will still be far greater than what the market can comfortably absorb.

A major driver of this imbalance is the revival of non-OPEC+ production. The bank notes that half of expected supply gains through 2027 will come from outside the alliance, driven by robust offshore developments and continued momentum in the global shale gas sector. Offshore, once seen as a cyclical and cost-intensive sector, has now transformed into a reliable, low-cost growth engine. It is poised to add 0.5 million barrels per day in 2025, 0.9 million barrels per day in 2026 and another 0.4 million barrels per day in 2027. With virtually all FPSOs through 2029 already approved, JP Morgan emphasizes that visibility on new offshore barrels is exceptionally strong and future completions are highly assured.

Shale oil remains the most flexible lever for global supply. While US shale growth is slowing, productivity and capital efficiency continue to support production. Outside the US, Argentina’s Vaca Muerta has developed into a scalable, low-cost frontier, supported by improved export infrastructure. In 2025, global shale supply increased by 0.8 million per day, and assuming oil prices remain around $50, shale production is expected to grow by 0.4 million per day in 2026 and 0.5 million per day in 2027.

These supply increases have led to a significant inventory build-up. Global observable stocks have grown by $1.5 million so far this year, with nearly $1 million in oil-on-water and Chinese stocks. JP Morgan sees this entire increase as an additional layer of supply that will extend into 2026. Without intervention, the surplus could reach 2.8 million barrels per day in 2026 and 2.7 million barrels per day in 2027.

Such imbalances imply that Brent could fall below $60 in 2026 and fall to the low $50s in the final quarter, ending the year with a $4 handle. By 2027, average prices could drop to $42, before heading towards $30 by the end of the year. While the full extent may not be realized, JP Morgan expects the rebalancing to come mainly through voluntary and involuntary supply cuts and maintains its Brent forecast of $58 for 2026. Currently, Brent is trading just above $60 per barrel.(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)