Investment Rating - The report does not explicitly state an investment rating for the oil industry Core Insights - Global oil demand averaged 104.3 million barrels per day (mbd) through June 24, showing year-over-year growth of 410 thousand barrels per day (kbd), but 130 kbd lower than the forecasted growth of 540 kbd for June [4] - Visible OECD commercial oil inventories decreased by 10 million barrels (mb) during the third week of June, with crude oil inventories dropping by 9 mb and oil product stocks falling by 1 mb [4] - Global liquid inventories have increased for the fourth consecutive week, rising by 9 mb in the third week of June, with a month-to-date build of 39 mb in June [4][5] Summary by Sections Oil Demand - US gasoline and jet fuel demand remained strong due to seasonal travel, while industrial fuel consumption was weak, with propane and distillate demand at post-pandemic lows [4] - Year-to-date global oil demand growth is at 1.01 mbd, closely aligning with the revised forecast of 1.06 mbd [4] Inventory Trends - OECD liquid stocks shifted from a 4 mb build in the first two weeks of June to a 6 mb decline, with crude inventories down by 21 mb and product inventories up by 15 mb [4] - The accumulation of oil product stocks has accelerated in June, marking the highest rate of build in 13 months [5] Regional Insights - South Korea reported a year-over-year decline in oil consumption statistics for May, with total oil demand in eight European economies declining by 30 kbd YoY in January [30][73] - Naphtha demand in East Asia remained stable despite initial disruptions, while Southeast Asian imports may face risks due to increased tariffs [4]

Geopolitical Risks and Market Impact - The market is becoming more accustomed to geopolitical risks, with the S&P 500 typically falling around 6% for about three weeks after such events before recovering [17] - Iran's potential closure of the Strait of Hormuz is seen as a worst-case scenario, which could drive oil prices to $120 per barrel and negatively impact equity markets [18][19] - Increased geopolitical risk may require a larger escalation to significantly impact markets [18] Middle East Conflict and U S Involvement - President Trump left the G7 summit early, citing the need to be in Washington to address the Israel-Iran conflict, and called for the evacuation of Tehran [1][47][49] - There is speculation about greater U S involvement in the conflict, potentially deploying bigger bombs or taking a direct hand, which would contradict the Trump Doctrine of non-intervention [1][7] - Israel is determined to push on with its goals against Iran, demanding an end to Iranian nuclear and missile programs and regional influence [9][11] - The U S may have been blindsided by Israel's timing of attacks on Iran, leading to discomfort with the lack of U S control over developments [35][36] Oil Market Dynamics - Oil prices are reacting to headlines about the Middle East conflict, with potential for continued volatility [74][75] - The International Energy Agency (IEA) forecasts that Chinese crude oil demand will peak around 2027, and global crude oil demand will peak around 2030 [80][81] - A collision of two ships just outside the Strait of Hormuz is being monitored, though initial reports suggest it is not linked to the conflict [78] Central Bank Policies - Deutsche Bank projects one rate cut by the Federal Reserve (FED) in December [24][31] - The Bank of Japan (BOJ) held interest rates and implemented a new plan to slow the pace of bond market tapering, reducing the run rate of reductions from ¥400 billion to ¥200 billion Yen [89][90] - The BOJ increased the number of securities it is willing to lend out to the market, increasing repo operations to add more liquidity [91] Trade and Economic Outlook - Trade policy is considered extremely uncertain, hinging on whether Japan and the U S can reach a trade agreement before the July 9 deadline [93][94] - Trump expressed concern that imposing tougher sanctions on Russia would cost "billions and billions of dollars" [55] Aviation Industry - Airbus dominated the Paris Air Show with orders worth $17 billion from Saudi customers [56] - The aviation industry is experiencing strong demand and tight supply, with manufacturers facing production constraints [59][60][61] - Approximately half of the growth in the aviation sector is expected to come from Asia, particularly India, driven by the rising middle class [69] Technology and Defense - OpenAI has won a $200 million contract with the U S Defense Department to help the agency determine how to use artificial intelligence for administrative and security tasks [95][97]

Market Reaction to Geopolitical Events - Initial reports of no damage to Iranian oil infrastructure led to a price correction after Brent crude prices initially spiked by 13%, settling at a 7% increase [1] - The market is closely monitoring the potential impact on Iran's oil production, export capabilities, storage, and refining capacity [2] - The market is sensitive to the possibility of a larger conflict involving the Strait of Hormuz, despite the difficulties and potential detriment to Iran [3][4] - Potential self-sanctioning by ship owners avoiding the region due to prolonged conflict could reduce oil and gas supply [5] - The market is in a wait-and-see mode, closely observing Iran's response to the Israeli attack and Israel's subsequent actions [6] Supply and Demand Dynamics - The oil market is currently considered frothy and oversupplied, providing a buffer against potential supply disruptions [9] - Brent crude prices had risen to $78, after being at $60 at the beginning of May due to concerns about the trade war impacting demand [10] - Weaker oil demand, influenced by trade war concerns and lagging Chinese industrial output, mitigates the immediate impact of potential supply reductions [10][11] - Despite the oversupplied market, the potential disruption of the Strait of Hormuz, though a remote possibility, is causing price gains [12] Geopolitical Developments - Reports indicate a large-scale Israeli attack involving over 200 Air Force planes targeting 100 Iranian nuclear and missile facilities [7][8] - Iran's response includes a statement emphasizing the necessity of nuclear enrichment [7][8]

Summary of J.P. Morgan Oil Demand & Inventory Tracker Industry Overview - The report focuses on the global oil industry, specifically analyzing oil demand and inventory levels as of May 29, 2025. Key Points 1. **Global Oil Demand Increase** Global oil demand has improved, primarily driven by a rebound in US oil consumption due to strong Memorial Day travel activities. As of May 28, the monthly expansion in global oil demand is tracking at approximately 400 thousand barrels per day (kbd), although it remains 250 kbd below expectations [3][4][5]. 2. **US Oil Consumption** US oil consumption has been significantly lifted by robust gasoline demand, particularly during the Memorial Day weekend and the start of the summer driving season. Distillate demand in the US surged as port activity improved, with container arrivals rising from 75.7k to 102.8k containers last week [3][4]. 3. **Chinese Trade Activity** In the week ending May 25, port container throughput in China increased to 6.56 million tonnes, marking the second highest level for the year. Overall port cargo volumes surged to 271 million tonnes, indicating robust trade activity despite tariff uncertainties [3][4]. 4. **Regional Challenges** The early onset of the monsoon season in the Indian subcontinent poses challenges for travel demand. Last year, high temperatures followed by monsoon rains led to a significant reduction in India's oil demand growth during the June-July period, dropping from 240 kbd to 120 kbd [3][4]. 5. **OECD Oil Inventories** Visible OECD commercial oil inventories rose by 2 million barrels (mb) in the fourth week of May, attributed to a 4 mb increase in oil product inventories, offsetting a 2 mb drop in crude oil stocks. Month-to-date, OECD stocks have expanded by 30 mb [3][4]. 6. **Global Liquid Inventories** Total global liquid inventories edged up slightly, with crude oil stocks falling by 1 mb while oil product inventories increased by 2 mb. Month-to-date, global liquid inventories have risen by 63 mb, with crude oil stocks up by 67 mb [3][4]. Additional Insights - The report highlights the importance of seasonal travel patterns in influencing oil demand, particularly in the US. - It also notes the impact of external factors such as weather patterns in India and trade uncertainties in China on regional oil consumption. - The increase in OECD inventories suggests a potential oversupply situation, which could affect future oil prices and market dynamics [3][4][5].