JPMorgan: Continued Inventory Drawdowns After Strait Reopening to Push Oil Prices Higher
Claire Weston
Brent dropped to $83/bbl after the Hormuz reopening deal, but JPMorgan argues the knee-jerk sell-off underestimates the supply gap — ongoing inventory draws should keep oil above $100/bbl for most of the year.
The strait is reopening — why would oil still rise?
JPMorgan's base case (June 1 restart): Q3 Brent average at $104/bbl, Q4 at $98/bbl.
If the restart slips to July 1, Q3 jumps to $116/bbl and Q4 to $117/bbl.
This means → Monday's drop priced in only one signal — "the strait is open" — without accounting for the shipping bottleneck that follows.
The strait is open — why can't oil flow through right away?
Over 220 laden tankers carrying roughly 130 million barrels of crude and products are currently stuck in the strait, plus about 150 ballast tankers trapped inside.
In plain terms = the first wave is a dam burst — stranded ships move first, but once they clear, fresh vessels cannot refill the gap fast enough.
Since the war began, global active laden tankers have fallen by roughly 400. A normal one-way voyage from the strait to China / Japan / Korea takes 20 days; the first wave of returning tankers may need close to 40 days to reload — a significant timing mismatch.
How long until flows fully recover?
JPMorgan's projected path (June 1 base): 83% of pre-war levels by July (about 5.5 million bbl/d still offline), 91% in August, 95% in September, 98% in October, near-full normalisation only in November.
This means → even if the deal holds, global crude supply stays in a "half-open" state through Q3 — inventories keep getting drawn down the entire time.
What happens when China's buyers come back?
China's May crude imports fell to the lowest since October 2017 — one of the key anchors keeping prices below $100 in recent weeks.
Bloomberg Economics warns: once flows stabilise, a return to aggressive Chinese procurement could tighten global energy markets, reignite inflation pressure, and put central banks in a more complicated policy bind.
This reflects a broader point — the next inflection in oil prices depends not just on how fast the strait recovers (supply side), but on the price at which China re-enters the market (demand side).
What are the bulls and bears betting on?
Managed-fund long positions have dropped to pre-war lows; Brent and WTI are only 14% and 20% above pre-war Friday levels — the market had already front-run a gradual reopening.
Bull case: strategic petroleum reserves need refilling + inventory draws continue → the dip is temporary.
Bear case: demand-side recovery takes time + war's long-term demand scarring caps out at 800,000 bbl/d → upside is limited.
Why does the LNG market matter here too?
Two damaged production trains at Qatar's Ras Laffan account for roughly 17% of total operating capacity; repairs will take 3 to 5 years.
This means → the market's prior consensus — LNG oversupply from 2026 onward — has been undercut.
Europe's peak injection season combined with returning Chinese demand gives LNG prices a foundation to move higher still.
Content is for reference only, not financial advice.