Markets

J.P. Morgan Warns Oil Curve Underprices Long-Term Risk

By Markets Desk · 2026-09-12 · 1 min read

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J.P. Morgan analysts argue the current oil forward curve is mispriced, suggesting near-term prices are too high while long-term targets are too low.

J.P. Morgan’s Head of Global Commodities Strategy, Natasha Kaneva, states that the oil forward curve is mispriced. The bank estimates near-term prices are approximately $6 too high. Conversely, prices for the final quarter of 2026 are estimated to be $10 too low.

The report questions the embedded assumptions of the current market structure. The U.S.-Iran conflict has lasted longer than initial models predicted. The market has repeatedly pushed normalization expectations into the future. This has created a disconnect between spot prices and long-term balances.

Market Resilience Defies Price Shocks

According to the report, the U.S. economy remains resilient despite inflation shocks. The stock market is near record highs. AI investment continues to support corporate earnings. Consumers are sustaining spending levels by relying on the wealth effect.

Long-term U.S. interest rates have risen. The Federal Reserve has shifted its policy stance. Policymakers entered 2026 expecting rate cuts. They now appear to be leaning toward hikes. This shift reflects a changing reaction function to economic data.

Inventory Drawdowns Remain Slow

Three forces are currently containing the supply crisis. Oil barrels are finding new flow paths. Inventories have drawn down far more slowly than forecast in May. Outside the U.S., China, and Japan, global stock draws have been minimal.

Policymakers are conserving emergency reserves. There is little incentive to release stocks when oil trades at $100. The burden of rebalancing has fallen on consumers. Households and companies are economizing on oil usage to absorb the shortfall.

Forecast Adjustments for Persistent Conflict

In a prolonged conflict scenario, these adjustment mechanisms are expected to persist. Middle East flows, including rerouted barrels, remain around recent levels. Regional exports averaged roughly 13.5 million barrels per day. This volume is about 10 million barrels per day below normal levels.

J.P. Morgan expects this supply gap to be absorbed through four offsets. The bank maintains that the status quo can continue for a considerable period. The 4Q26 price target may be revised upward by $8. The source for these findings is GN markets/commodities (en-US).

Based on reporting by Rigzone, compiled by the Tradingbird desk.