J.P. Morgan's oil forecast angers nearly everyone

In a recent forecast, J.P. Morgan's head of global commodities strategy, Natasha Kaneva, projected a bearish outlook for oil prices over the next two years. According to her analysis, the average West Texas Intermediate (WTI) crude oil price is expected to decline to US$64 per barrel in 2025 and further drop to US$57 per barrel in 2026. This projection is surprising given that current prices are around US$70 per barrel, indicating a significant decline that may not only affect investors in energy stocks but also the overall sentiment in energy markets. The anticipated price dip is attributed to an expected surplus of 1.3 million barrels per day in 2025, as the oil market shifts from a balanced state this year. This oversupply is anticipated despite a marginal increase in U.S. oil production predicted by J.P. Morgan, with only 500,000 barrels per day expected to increase by 2026, bringing the total to 13.7 million barrels per day. Additionally, the effects of President Trump's proposed tax cuts and deregulations aimed at stimulating U.S. production remain uncertain, as many prospective drilling sites may still be unprofitable at the lower commodity prices. This bearish forecast contrasts starkly with the sentiment of some investors who believe they might be insulated from the negative impacts of lower oil prices due to the current yield in domestic bank stocks of over four percent. Mixed earnings results from banks, including the Bank of Nova Scotia, Royal Bank, and National Bank, further complicate the investment landscape, presenting a cautious outlook for investors in these sectors.