JPMorgan sees 1.4 million bpd oil surplus as exports recover

By Elena Vasquez

JPMorgan, in a statement reported by Reuters, estimated a global oil surplus of 1.4 million barrels per day in October, up from 1.1 million bpd in September and close to the 1.3 million bpd average recorded last year. The bank said September marked the market's return to surplus.

The route at the center of that change is the Strait of Hormuz, through which shipping normally carries around 20% of global oil supplies. The conflict began with US and Israeli strikes on Iran, followed by Iranian retaliatory attacks on Israel and targets across the Gulf.

Disruptions to shipping through Hormuz severely affected regional crude exports and triggered a major supply shock. Middle East exports stood at 9.8 million bpd in March before recovering.

What changed in the October balance?

JPMorgan said: “Inventory levels and trade flows indicated that excess crude supplies were returning to the market.” Global crude imports reached 44.9 million bpd in October, an increase of 1.3 million bpd from a year earlier.

Middle East oil exports recovered to approximately 20.7 million bpd, compared with 9.8 million bpd in March, although volumes remained below pre-conflict levels. The regional recovery supplied more barrels to the market as the shipping disruption eased.

Rising production elsewhere added to the surplus. JPMorgan estimated that Latin America supplied an additional 1.5 million bpd year on year, led by Brazil, Venezuela, Guyana and Argentina. Those barrels widened the gap between available supply and consumption even as Middle East exports recovered.

Restored Gulf exports and higher Latin American output widened the surplus.

How much demand disappeared during the conflict?

The 3.3 million bpd demand estimate was the counterweight to the 1.4 million bpd October surplus. JPMorgan said elevated fuel prices and supply disruptions weighed on consumption. The estimate covers the period since the conflict began, whereas the 1.4 million bpd figure describes October's balance, and Middle East export volumes remained below pre-conflict levels.

JPMorgan's figures show that weaker consumption was still enough to leave the market in surplus.

What does the Saudi Aramco recovery show?

HSBC's separate forecast offers a closer look at Saudi Aramco and the wider Gulf recovery.

HSBC raised its fourth-quarter Saudi Aramco crude production forecast to 8.3 million bpd from 6.3 million bpd, citing a faster-than-expected recovery in oil exports. It lifted its 2027 forecast to 9.8 million bpd from 8.8 million bpd and expects output to reach approximately 10 million bpd by mid-2027.

The revision added 2 million bpd to the fourth-quarter forecast and 1 million bpd to the 2027 estimate.

Saudi crude exports recovered to around 7 million bpd in October, approaching pre-conflict levels, HSBC said. The bank said: “The recovery in Middle East exports indicated that supply disruptions caused by the conflict were easing.”

Saudi and regional supply was recovering, but it had not reached its pre-conflict level.

What should the market watch next?

The key checks are whether Middle East exports continue to recover, whether global imports hold near October's 44.9 million bpd level, and whether the estimated 3.3 million bpd demand decline begins to reverse.

For Saudi Aramco, HSBC's 8.3 million bpd fourth-quarter production forecast is the next operational marker, followed by its expectation of approximately 10 million bpd by mid-2027.

The watch item is whether Gulf exports can keep recovering through Hormuz, demand can stabilize after the 3.3 million bpd drop, and Saudi Aramco can move from roughly 7 million bpd of October exports toward 8.3 million bpd in the fourth quarter.