Key takeaways
- In April, J.P. Morgan Research lowered its Brent price forecast to $66/bbl for 2025 and $58/bbl for 2026 — a projection it maintains despite recent trade policy developments.
- The Trump administration continues to prioritize reducing oil prices to manage inflation.
- Supply-demand dynamics also point to lower oil prices, especially as the Organization of the Petroleum Exporting Countries (OPEC) is set to boost crude production by 411,000 barrels per day in June.
Amid ongoing macroeconomic and trade policy uncertainty, oil prices remain under pressure, with Brent crude down 25% since its January peak. However, investors seem increasingly optimistic that the worst is over and that the U.S. tariffs situation is finally de-escalating. There is also the belief that the “Trump put” — or the notion that when markets start to fall, the President will take action to turn things around — is back in play. What does all this mean for oil prices?
What is the oil price forecast for 2025 and 2026?
In April, J.P. Morgan Research lowered its Brent price forecast to $66/bbl for 2025 and $58/bbl for 2026 — a projection it maintains despite recent trade policy developments.
“There is a prevailing view that the tailwinds from trade deal announcements and the administration’s shift in focus from tariffs to taxes and deregulation will drive oil prices back into the mid-$70s following the recent downturn,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan. “However, while the recent de-escalation in trade talks has reduced the probability of a bear case, the ‘Trump put’ does not extend to energy as the administration continues to prioritize lower oil prices to manage inflation.”
Indeed, President Trump has made energy a central part of his agenda. The White House has indicated a strong preference for reducing crude prices to $50/bbl or lower, considering this goal a top priority among its objectives. “That said, we don’t anticipate the administration intervening to stabilize prices unless crude falls below $50 WTI, where shale production starts to decline,” Kaneva said.
“Increasing supply to maximize revenue might be the optimal strategy for an oil-producing country. This heightens the risk of another market reset occurring somewhere between 2025 and 2026.”
Natasha Kaneva
Head of Global Commodities Strategy, J.P. Morgan
How is global oil supply and demand playing out?
Supply-demand dynamics point to lower oil prices in the coming months. Demand remains soft, and markets may be underestimating final tariff levels on U.S. imports. J.P. Morgan Research now projects oil demand to expand by 800 kbd (thousand barrels per day) in 2025 — down 300 kbd from its previous forecast.
In addition, supply is set to increase, with OPEC boosting crude production by 411,000 barrels per day in June — reportedly to ensure members adhere to quotas. “The market, thus far, has largely overlooked the apparent shift in OPEC’s reaction function, which we see as a more bearish argument than the potential decline in demand,” Kaneva noted.
Looking ahead, several OPEC members are expected to further ramp up production over the next few years. The United Arab Emirates (UAE) continues to invest in new capacity across its Upper Zakum, Lower Zakum, Umm Shaif, Bab and Bu Hasa oil fields, translating into an incremental increase of around 200 kbd annually in 2025 and 2026. Kazakhstan has successfully deployed nearly 200 kbd of new production capacity at its Tengiz drilling base, while Iraq has been enhancing refining capacity in Kirkuk and Basra. Kuwait is also modestly increasing its capacity in the Light Jurassic Formation, and production in the Saudi-Kuwaiti Neutral Zone is trending about 40 kbd higher in 2025.
Crucially, a significant portion of the capital expenditure for these expansions is being funded by major international oil companies, which are set to channel more than $10 billion into the Middle East upstream sector each year from 2025 to 2027.
“Given the diminishing price reaction to a 1 mbd (million barrels per day) supply cut — from $10 in 2023 to $8 in 2024 and $4 in 2025 — and our price forecast for 2026, increasing supply to maximize revenue might be the optimal strategy for an oil-producing country,” Kaneva said. “This heightens the risk of another market reset occurring somewhere between 2025 and 2026.”
What do lower oil prices mean for consumers?
Lower oil prices could offer stretched consumers some relief, especially if the cost of gasoline and other related goods and services decreases. This could support U.S. household consumption, which is under pressure from import tariffs.
The Trump administration recently highlighted a significant slowdown in energy inflation, which helped bring the headline CPI for March to 2.6% on a three-month annualized basis — down from 4.5% in January. If the decline in oil prices is sustained, it could subtract 1.5 percentage points from annualized global CPI gains this quarter, according to J.P. Morgan Research.
“While downplaying a quick tariff reversal or significant fiscal stimulus, a drop in crude oil prices will boost U.S. and global household purchasing power,” said Michael Feroli, chief U.S. economist for J.P. Morgan. “The cushioning effect of lower oil prices could prove particularly decisive for U.S. consumers and their willingness to smooth through a large purchasing power squeeze from higher tariffs this quarter and next.”
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