Oil companies are pumping out crude at a record rate, and demand can’t keep up. That dynamic could continue through 2027, according to JP Morgan strategist Natasha Kaneva. And if it does, oil prices could fall into the $30s per barrel by the end of 2027, about half of what they are worth today. Below $40, few U.S. projects would be profitable.
Kaneva, who heads the bank’s global commodities team, thinks it is unlikely that oil actually falls to that level. Historically, low oil prices cause producers to cut back on drilling or convince OPEC and its allies to reduce how much oil they sell into the market. When that happens, supply shrinks and prices bounce back. Her price target for Brent crude, the global benchmark, is $58 in 2026 and $57 in 2027.
“The outlook for the next two years is, at its core, a matter of basic arithmetic,” she wrote.
Brent crude rose 1.3% to $63.37 on Monday.
Oil demand has been rising, and should continue to do so. But supply is rising more than twice as fast, and it is starting to overwhelm the market. Oil prices are down 15% this year.
This year, oil supply is outpacing demand by about 1.3 million barrels per day. In 2026, Kaneva estimates that the oil oversupply will jump to 2.8 million, and 2.7 million in 2027.
Shale-drilling in the United States has been the biggest driver of oil production growth in the past three years, but projects in other countries will soon take over. Major offshore oil projects in Brazil and Guyana are set to supercharge oil supply growth in 2026 and 2027. Together those two countries should add 500,000 to 700,000 barrels of additional oil production growth to the market per year. That is a small but significant piece of the roughly 106-million barrel per day market.
Kaneva doesn’t think that producers will allow the oversupply to get that bad, however. “Adjustments are expected on both the supply and demand sides; however, the greatest burden of rebalancing will almost certainly fall on supply,” she wrote.
Around $51 Brent oil prices, many U.S. shale producers would have to slow output because they wouldn’t be making enough money, she notes. The Trump administration could also take advantage of low prices to increase sanctions enforcement against Iran and Russia, pulling barrels off the market.
Write to Avi Salzman at avi.salzman@barrons.com
