Xiaomo: Crude oil price expectations have been lowered, and the bottom of the price has been significantly reset!

The Zhitong Finance App learned that J.P. Morgan recently released a research report saying that due to rising uncertainty in global trade policies and changes in the OPEC+ response model, the 2025 Brent oil price forecast was lowered from 73 US dollars to 66 US dollars (WTI to 62 US dollars), and the 2026 target was lowered to 58 US dollars (WTI to 54 US dollars). Under the Trump administration, the US Strategic Petroleum Reserve (SPR) no longer acts as a price support; the estimated price intervention bottom line is $50.

J.P. Morgan believes that US shale oil will bear the brunt, and production will shrink in 2026. If oil prices continue to fall, J.P. Morgan expects the US to cut 115 rigs from July 2025, and crude oil and condensate production will drop 200,000 b/d year on year in 2026. This will further affect the relevant gas supply, but it will lead to HenryHub gas prices.

However, OPEC+ is once again increasing production, which may make strategic choices to stabilize the market. OPEC+ unexpectedly announced an additional 400,000 b/d supply in May, and Saudi Arabia will also cut crude oil prices by 2.3 US dollars/barrel for Asia. The report points out that if current prices continue, OPEC+ will need to make a strategic choice between increasing production and stabilizing prices, and the risk of Saudi Arabia's fiscal deficit will increase.

Due to the economic drag brought about by the new round of tariffs and fiscal contraction, the forecast for global crude oil demand was lowered. The growth forecast for 2025 is 800,000 b/d, but it is still higher than the 30-400,000 b/d estimate of the peer forecast. Growth is expected to be weak in the second half of 2025, but the first half was supported by forward trade.

J.P. Morgan also pointed out that it is expected that the US energy policy will shift to “cost reduction and efficiency” rather than subsidy intervention. Although oil prices have fallen below the break-even line for shale oil, the Trump administration emphasized achieving sustainable development under the $50 WTI through deregulation and technological progress.

Non-OPEC projects have been less affected, and green energy investment is still resilient. Deep-water projects such as Brazil, Guyana, and Norway continue to advance due to low costs and tax incentives. However, decisions on new projects may be delayed because oil prices are at the “beginning of the letter five.”

Appendix:

Goldman Sachs Petroleum Analyst: There is still a risk that oil prices will decline

Goldman Sachs expects Brent crude oil and West Texas Intermediate (WTI) prices to drop slightly for the rest of 2025, with average prices of $63 and $59 per barrel, respectively, and $58 and $55 per barrel in 2026 ($5 lower than the forward price of Friday's closing price).

The baseline scenario assumes that, first, the US avoids a recession; second, the supply of the Organization of Petroleum Exporting Countries and its partners (OPEC+) increases only moderately. We answer key questions about the drivers, effects, and future risks of falling oil prices.

Goldman Sachs lowered its forecast price for Brent/West Texas Intermediate Crude Oil (WTI) for December 2026 to $55/$51 per barrel, reflecting additional gross domestic product (GDP) cuts, including the stagnation of the US economy. This has led to weakening term spreads and lower forward prices. Goldman Sachs lowered its forecast for oil demand growth in 2026 to 0.4 million barrels per day (previously about 0.6 million barrels per day), as weaker GDP offsets support from falling oil prices and a weaker dollar. In the downside scenario, Goldman Sachs estimates that by December 2026, the price of Brent crude oil could drop to $50 per barrel during a typical US recession, to $45 per barrel in the face of a slowdown in global GDP, or fall slightly below $40 per barrel in the case of the complete withdrawal of the Organization of Petroleum Exporting Countries and its allies (OPEC+) at the end of 2026 and a sharp decline in the global economy.