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Investing.com -- Oil prices have suffered a bumpy start to the year, but JPMorgan says many in the market aren’t yet to adopt a bearish consensus amid expectations for sanctions on Iran, Russia, and Venezuela to continue to keep a lid on global crude supplies.
"After attending IE Week in London, we concluded most investors likely held long positions in oil, with the pain trade skewed to the downside," analysts from JPMorgan said in a recent note.
The consensus on the Brent price for 2025 vary widely, ranging from a low of $67 to a high of $83, according to Reuters’ February price poll, in contrast with JPMorgan’s forecast of $73.
One of the key difference lies in how much weight JPMorgan’s forecast places on a potential jump in non-OPEC supply versus consensus.
"Our outlook for Brent oil prices anticipates a shift in the global oil market from a balance in 2024 to a large 1.3 mbd surplus in 2025, followed by another 1.3 mbd surplus in 2026," the analyst said.
The view from JPMorgan’s analysts isn’t a new one. The analysts made the call for growth in non-OPEC supply in 2024, projecting a 1.7 million barrels per day increase for the year, but that forecast fell short. Data revealed that non-OPEC supply fell short by 400,000 barrels per day last year.
Lower-than-expected output from Brazil and Canada was largely the cause of the shortfall, the analysts said.
"Challenges such as wildfires in Canada led to a growth of only 250 kbd, falling short of our projected 450 kbd increase," they added. While "regulatory strikes and maintenance in Brazil kept production levels flat compared to 2023, contrary to our expectations of a 200 kbd growth in 2024."
The uptick in non-OPEC production is still likely to occur and push the market into supply as issues that weighed on production in Brazil and Canada are moving to the rearview mirror.
"While the market views these as structural issues, we believe they were one-off events," they said.
Sanctions on Russia, Iran, Venezuela have helped keep a lid on global supply, but sanctions are likely to be lifted, helping to bring millions of barrels online, the analysts suggested.
"Crucially, our baseline view also envisions a ceasefire between Russia and Ukraine this year, alongside some form of agreement between the US and Iran, with no sanctions imposed on oil exports from either Russia or Iran," they added.
But at least half, or between 50% and 65% of respondents at the Bloomberg IE event "identified sanctions on Iran, Venezuela and Russia as the most influential events for the oil market this year," the analysts said.