Oil Market Headed for a Glut, Prices Could Halve by 2027
A significant imbalance is building in the global oil markets, setting the stage for a potential sharp decline in prices. According to an analysis from JP Morgan, the world's oil supply is growing at more than double the rate of demand, a dynamic that could push crude oil prices down to the $30s per barrel by the end of 2027.
The Arithmetic of an Oversupply
Natasha Kaneva, the head of JP Morgan's global commodities team, laid out a stark forecast. While oil demand has been increasing, supply is rising much faster. This year, the market is seeing an oversupply of approximately 1.3 million barrels per day. This gap is projected to widen dramatically to around 2.8 million barrels per day in 2026 and 2.7 million barrels per day in 2027.
Kaneva described the outlook for the next two years as a matter of basic arithmetic. If this production surge continues unchecked, it could overwhelm the market, causing prices to plummet to about half of their current value. At those levels, below $40 per barrel, few oil projects in the United States would remain profitable.
New Production Hotspots in Brazil and Guyana
The driving force behind this looming supply glut extends beyond the well-known shale fields of the United States. Major new offshore oil projects in Brazil and Guyana are set to supercharge global supply growth starting in 2026.
Together, these two nations are expected to add a significant 500,000 to 700,000 barrels of new oil production to the market each year. While this is a small portion of the roughly 106-million-barrel-per-day global market, it represents a substantial and steady new stream of supply that will contribute to the surplus.
Why a Price Collapse Might Be Avoided
Despite the bearish numbers, Kaneva believes it is unlikely that oil prices will actually fall to the $30s. History suggests that low oil prices trigger a market correction. Producers, facing financial pressure, typically cut back on drilling. Furthermore, alliances like OPEC and its partners often intervene by reducing their output to stabilize the market, causing supply to shrink and prices to recover.
Kaneva's official price target for Brent crude, the global benchmark, is $58 in 2026 and $57 in 2027. She notes that around the $51 per barrel mark, many U.S. shale producers would be forced to slow down output as profitability vanishes. Additionally, geopolitical factors could play a role; the Trump administration might leverage low prices to tighten sanctions on oil exports from Iran and Russia, effectively removing barrels from the global market.
For now, the market remains volatile. Brent crude rose 1.3% to $63.37 on the Monday the report was highlighted, even as prices have fallen approximately 15% overall this year. The central question for the coming years is whether producers will proactively turn off the taps to prevent a major price crash.
