JP Morgan sees crude supply cuts nearing 12 million bpd as tanker halt tightens markets

• Commercial tanker traffic through the Strait of Hormuz, which handles one-fifth of global oil supply, remains extremely limited with most vessels now Iranian-flagged heading to China
• Global markets face severe shortages of diesel, jet fuel, LPG, and naphtha, with Europe particularly exposed after banning Russian imports and losing access to 5 million bpd of refined products that typically transit the affected waterway
• Approximately 2 million bpd of Middle Eastern refining capacity is offline due to export constraints and infrastructure attacks, with limited spare global capacity likely driving higher product prices rather than increased output

JP Morgan: Crude Supply Cuts Approaching 12 Million bpd Amid Strait of Hormuz Disruption

JPMorgan reports crude oil supply cuts are set to reach nearly 12 million barrels per day by late March 2026, driven by a two-week disruption to tanker traffic through the Strait of Hormuz following U.S.-Israeli conflict with Iran.

Key Developments

Supply Disruptions:

• Production shut-ins have reached approximately 6.5 million bpd, exceeding earlier estimates by 1 million bpd
• Global supply currently sits 7 million bpd below demand, creating severe shortages
• Commercial tanker traffic through the strait remains "extremely limited," with most vessels Iranian-flagged and China-bound

Geographic Impact:

• Supplies to Asia could be exhausted this week
• Europe-bound flows likely to halt next week
• The Strait of Hormuz normally handles one-fifth of global oil supply

Refined Products Crisis:

Markets face acute shortages of diesel, jet fuel, LPG, and naphtha. Approximately 5 million bpd of refined products typically transit the disrupted waterway. Europe is particularly vulnerable, heavily dependent on Middle Eastern diesel and jet fuel after banning Russian imports.

About 2 million bpd of Middle Eastern refining capacity is effectively offline due to export constraints and infrastructure attacks.

Market Implications

While refiners in the U.S., Europe, India, and Northeast Asia may increase operations to capitalize on strong margins, JPMorgan warns that limited spare capacity and reduced crude availability will primarily drive higher product prices and firmer margins rather than increased output.

The U.S. has issued permits allowing countries to purchase stranded Russian oil, though this appears insufficient to address the supply deficit. African officials have separately warned the price surge threatens economic recovery and key sectors like mining.