Global oil markets lost approximately 11.1 million barrels per day of supply since late February, representing about 10 percent of worldwide demand. Despite this reduction, Brent crude recently reached just over $101, remaining roughly $20 below its spring wartime peak. That price behavior contradicts historical market responses to supply disruptions of this scale.
JPMorgan strategists led by Natasha Kaneva said inventory drawdowns to record lows did not drive prices higher as expected. Instead, the market adjusted through a sharp reduction in demand—a structural rebalancing rather than a temporary inventory effect.
The International Energy Agency now projects global oil demand to fall by a full 1 million barrels per day this year, a substantial revision from its earlier estimate of a 420,000 barrels-per-day drop. The agency's latest monthly report showed demand falling by nearly 5 million barrels per day year-over-year in the second quarter before a tentative recovery began.
China, the world's largest oil importer, played a critical role in containing prices by reducing its purchasing pace. Seaborne crude imports fell sharply, with some estimates placing the cut near 4 to 5 million barrels per day at its lowest point. Beijing drew heavily on its oil stockpiles—both official strategic reserves and less transparent commercial inventories—absorbing a significant portion of the supply shock and making the market appear better supplied on paper than physical reality supported. That buffer is finite, and its eventual replenishment will test market stability.
JPMorgan strategists said the demand loss was extraordinary, given the global economy grew above potential in the first half of the year. Oil use declined faster than in any of the past six years outside the pandemic, suggesting forced rationing rather than organic efficiency gains.
The petrochemical sector took the hardest hit, with plants shutting down or slowing dramatically due to unavailable or prohibitively priced feedstock. Aviation and road fuel consumption also fell. That demand destruction translates into lost jobs, higher consumer prices and reduced profit margins for manufacturers dependent on diesel and jet fuel.
The United States maintained record domestic oil production and conducted emergency releases from its Strategic Petroleum Reserve, providing some stability. But U.S. output cannot permanently offset global dependence on critical chokepoints. Houthi attacks on Red Sea shipping have contributed to falling traffic through the Strait of Hormuz.
As Northern Hemisphere winter approaches and demand rises, the market faces a tightening supply picture. The current calm has been sustained largely by China's inventory drawdowns and suppressed demand. When China begins to refill its tanks, the full impact of ongoing supply disruptions will become apparent.
