JPMorgan Faces Challenges in Predicting Oil Prices as Iran Conflict Worsens Nigeria's Fuel Issues

JPMorgan, one of the biggest investment banks in the world, says it can no longer clearly predict the global oil market. The ongoing US-Israeli conflict with Iran is disrupting energy supplies.

This is the first time since the conflict started that JPMorgan has stopped providing a baseline scenario for oil markets.

"We simply don’t know how to model the endgame," Reuters quoted JPMorgan analysts in a note released on Thursday.

This warning comes as Nigeria faces another rise in petrol prices. In many areas, pump prices have gone above N1,400 per litre.

The latest price hike followed an N85 increase in the petrol price set by Dangote Petroleum Refinery. The price rose from N1,265 to N1,350 per litre due to a spike in international crude prices.

A survey of filling stations in Abuja on Saturday morning showed big differences in pump prices. Some stations were selling petrol for about N1,400 to N1,450 per litre. This is a rise from the N1,200 to N1,300 range seen last month.

At the Rainoil filling station on the Lugbe axis of airport road in Abuja, petrol is sold at N1,450 per litre. Last month, it was around N1,200 to N1,300. At Danmarna, fuel is priced at N1,410 per litre. Cone Oil is selling at N1,405 per litre. BOVAS is selling at N1,410 while NNPC is pricing it at N1,430.

These price hikes have come even after some easing in fuel prices. There were hopes that the conflict in the Middle East would calm down, and that shipping restrictions through the Strait of Hormuz would ease.

Although Nigeria produces a lot of crude oil, it is not immune to international oil market disruptions.

When global crude prices change, it affects domestic petrol prices due to costs related to crude feedstock, refined products, freight, and other supply-chain expenses.

The recent increase in the wholesale price from Dangote Refinery has led to higher pump prices at filling stations.

Brent crude, the standard for Nigerian oil, has stayed above $100 per barrel amid ongoing uncertainty over supplies from the Middle East. Brent closed at $104.87 per barrel on Friday, according to Reuters.

The ongoing disruption of shipping through the Strait of Hormuz is a big worry for global energy markets. This waterway is a key route for oil and refined-product shipments.

For Nigeria, the impact is clear as it flows from the international oil market to local transport costs, logistics, electricity generation, and other economic activities that rely on petroleum products.

JPMorgan said it initially thought there were economic limits that the Trump administration would not cross.

But six months into the conflict, the bank noted that many of those beliefs have changed.

"Many of those lines have been crossed, yet the exit strategy is less clear, not more," the bank said, according to Reuters.

JPMorgan noted that oil prices have gone above $100 per barrel. It also mentioned that US gasoline prices hit $4.37 per gallon while US diesel prices reached a record $6.31 per gallon, with inventories at historic lows.

The bank estimated Brent's fair value at about $90 per barrel for September. This is in contrast to market prices around $106, indicating that investors expect more supply losses.

Around 10 million barrels per day of supply have already been affected.

JPMorgan also highlighted risks to other key energy routes. This includes the Bab el-Mandeb Strait, attacks on Saudi export infrastructure, ongoing attacks on Russian refining facilities, and wider geopolitical tensions about global energy supplies.

Despite the scale of these disruptions, oil prices have not risen as sharply as JPMorgan initially expected.

The bank said global inventories of crude and refined products have dropped by about 555 million barrels since the conflict started. This is about one-third of what they had projected earlier this year.

At the same time, global oil demand is about 4.4 million barrels per day lower than last year. This has helped balance out some of the supply losses.

"By relying more on demand destruction and less on stock draws, the market has managed to handle an extraordinary supply disruption without a lasting rise in crude prices," the bank noted.

Since the conflict began, Brent has averaged about $94 per barrel, according to JPMorgan.

This warning comes as oil executives are increasingly doubting the belief that the disruptions will be temporary.

Chevron Chief Executive Mike Wirth and other oil industry leaders have warned that a global fuel crisis is here as supplies tighten and commercial fuel inventories drop.

These comments are at odds with ongoing reassurances from US officials that the disruptions will eventually end.