Global Oil Demand Falls Sharper Than Expected, Keeping Prices Below Wartime Peaks
Despite a significant disruption in oil supply due to geopolitical tensions and attacks on shipping routes like the Strait of Hormuz and Red Sea, global crude prices have not surged as much as expected. JPMorgan strategists note that while inventories are at record lows—due to about 11.1 million barrels per day lost from conflicts—the market has rebalanced through a sharp drop in demand rather than supply constraints. Global oil demand is now projected to fall by 1 million barrels per day this year, according to the International Energy Agency (IEA), which marks an upward revision of its earlier forecast. This unexpected decline—faster and deeper than seen since the pandemic—is puzzling analysts who had anticipated a continued rise in consumption. The demand destruction is attributed to factors like reduced workweeks in Southeast Asia, cutbacks by European airlines, and large-scale U.S. strategic reserve releases. However, even with these known contributors, strategists remain uncertain about how much of this drop stems from unreported inventory releases—particularly from countries such as China.
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Topics: commodity markets energy demand geopolitical tensions oil