Key takeaways
- In light of soft supply-demand fundamentals, J.P. Morgan Global Research sees Brent crude averaging around $60/bbl in 2026.
- Despite rising tensions between the U.S. and Iran, protracted disruptions to oil supply are unlikely.
- Sanctions on Russian oil are reshaping global trade flows, with barrels being redirected away from India and primarily toward China.
Global oil markets are navigating a challenging environment characterized by strong demand, even stronger supply growth and evolving geopolitical risks. In light of these factors, what’s the outlook for oil prices?
What’s the forecast for oil prices for 2026 and beyond?
Despite a recent spike in oil prices, J.P. Morgan Global Research expects to see Brent crude averaging around $60/bbl in 2026.
This bearish forecast is underpinned by soft supply-demand fundamentals, which point to lower oil prices in the coming months. While world oil demand is projected to expand by 0.9 million barrels per day (mbd) in 2026, global oil supply is set to outpace demand — though production cuts are likely.
“Oil surplus was visible in January data and is likely to persist,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan. “Looking ahead, our balances continue to project sizable surpluses later this year, suggesting that voluntary and involuntary production cuts will be needed to prevent excessive inventory accumulation. This would help stabilize Brent prices at around $60/bbl.”
“Regime changes in oil-producing countries — whether through leadership transitions, coups, revolutions or major political shifts — can have a profound impact on oil policy, production and global oil prices, in both the short and long term.”
Natasha Kaneva
Head of Global Commodities Strategy, J.P. Morgan
How might geopolitical risks impact global oil markets?
Geopolitical risks remain a wild card, however. Conflicts can vastly impact oil supply and demand, fueling price volatility. For instance, the evolving situation in Venezuela could pose a considerable upside risk to global oil supply, especially as the country sits on the largest proven oil reserves in the world.
More recently, markets have turned bullish on oil prices in anticipation that the U.S. will take military action against Iran, with Brent trading around $10/bbl above fair value in mid-February. “But given elevated inflation and this year’s midterm elections in the U.S., we do not anticipate protracted oil supply disruptions. If military action does occur, we expect it to be targeted, avoiding Iran’s oil production and export infrastructure,” Kaneva said. “With the region’s proximity to major energy chokepoints, brief, geopolitically driven crude rallies are likely to continue, but these should eventually subside, leaving soft underlying global market fundamentals.”
On a broader level, however, sweeping political reform in Iran could have a significant impact on global oil prices. “Regime changes in oil-producing countries — whether through leadership transitions, coups, revolutions or major political shifts — can have a profound impact on oil policy, production and global oil prices, in both the short and long term,” Kaneva noted. “While demand conditions and OPEC’s spare capacity significantly shape the overall market impact, these events typically lead to a substantial spike in oil prices, averaging a 76% increase from onset to peak.”
Since 1979, there have been eight notable instances of regime change in medium- to large-scale oil-producing nations, each with significant implications for global oil prices and supply dynamics. After the Iranian Revolution, for example, oil prices more than doubled, triggering a global economic recession. Iranian crude oil production has not recovered since, and remains 2 mbd below pre-revolution levels. “If history serves as a guide, further destabilization of Iran could lead to significantly higher oil prices sustained over extended periods,” Kaneva added.
Major geopolitical events can curtail oil production
Major geopolitical events can significantly affect oil production. The impact was most pronounced following the Iranian Revolution in 1979, the 2003 invasion of Iraq and the Libyan civil war in 2011.
How are sanctions on Russian oil reshaping global trade flows?
In light of the latest round of U.S. sanctions, nearly 70% of Russian crude is now subject to restrictions. President Trump also recently announced lower U.S. tariffs on Indian goods, contingent on India’s continued reduction of Russian oil imports. Consequently, India has scaled back its intake of Russian oil and flows are being redirected primarily toward China, accelerating an ongoing reshuffle in global crude trade.
“Under the pressure of sanctions, geopolitical factors and price differentials, crude flows are already being redirected. India’s partial pullback from Russian crude — amounting to a loss of 600–800 thousand barrels per day (kbd) — is being offset by increased shipments to China, where Russian crude imports have risen by 0.5 mbd, with independent refiners and storage facilities providing the flexibility to absorb these discounted barrels,” Kaneva noted.
However, J.P. Morgan Global Research still expects India to maintain Russian imports at around 0.8 to 1.0 mbd. For starters, Russian Urals crude remains attractively priced, while comparable alternatives from the U.S. or Middle East are generally more expensive and margin-dilutive. Following the easing of U.S. sanctions, Venezuelan oil has returned to India, but the volumes cannot fully replace Russian crude and Indian refiners continue to increasingly source Russian oil from non-sanctioned intermediaries.
“All in all, we contend that India’s pullback is structural but limited, with China remaining the marginal absorber of discounted barrels. As a result, overall Russian exports are likely to remain resilient, though at higher discounts and with increased logistical complexity,” Kaneva noted. “In this context, the sanctions reinforce an existing market trend — Russian barrels remain exportable, but only at increasingly steep discounts.”
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