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Yves here. John Helmer highlights a recent JP Morgan investor report, in which its team covering the oil markets threw up their hands and said it was impossible to forecast these days. That’s an astonishing admission from analysts paid big bucks to come up with a prognostication no matter what.
Helmer usefully includes the oil mavens justification. They don’t mention the elephant in the room, that Trump jawbowing plus persistent happy-faced reporting from the likes of Bloomberg has created a huge chasm between what is happening in the physical versus the paper oil markets. But they do describe an issue that is not getting enough attention: that recessionary conditions are cutting into demand and thus calling forecasts of super high oil prices into question. There is an old investor saw that explains that syndrome: “The cure for high oil prices is high oil prices.”
Helmer has regularly been critical of Russian central bank chief Elvira Nabiullina is again below. Many have criticized her for being too orthodox and thus too biased towards curbing inflation as opposed to promoting growth, and of encouraging Putin’s neoliberal tendencies. However, even though her interest rate stewardship may be less than ideal (I am not remotely expert enough on the Russian economy to judge), she did do the most important job of a central banker very well, which was to keep the system operating well in the crisis, at the start of the Special Military Operation. Precisely because Russia righted its economic ship quickly, it’s too often forgotten what a difficult task that was, and how that accomplishment was proof of the caliber of the team Putin had created.
Importantly, Helmer calls out that Nabuillina includes the possibility of a serious recession, as in a GDP fall of 8% to 10%, as her among her four forecasts for 2027. Why that has not gotten broader notice is beyond me. Admittedly, her baseline is for no growth in 2026 and at most 2.5% for 2027. Any growth over 1% in 2027 is likely to look not too bad given the poor outlook for the rest of the world.
By John Helmer, the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and an advisor to government heads in Greece, the United States, and Asia. He is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears
It’s not surprising that JP Morgan, the largest bank in the US, and the Central Bank of Russia (CBR) under Elvira Nabiullina agree on the future and what’s to be done to get there profitably.
However, when JP Morgan’s commodities research team – composed of three Russian émigrés to the US – reported to clients last month on global oil demand, supply and price they admitted they do not know how to predict the future. “We don’t have a baseline view” was their professional euphemism. They explained, as reported indirectly, “since the [Iran] war began, Brent has averaged about $94, not $130. Global inventories of crude and products are down about 555 million barrels — only one-third of what JPMorgan originally projected. Demand is running about 4.4 million b/d below year-ago levels. The market cleared the shock through demand destruction first, and stock draws second…When commercial inventories fall, prices usually rise because buyers compete for scarce barrels. When the market clears through weaker demand, the price response works the other way. China is the case study: JPMorgan estimated Chinese gasoline demand destruction at about 180,000 b/d and said 70% of that may not return even after markets normalize, which could cut China’s crude import need by as much as 1 million b/d.”
The bank is warning that, whether or not the Hormuz and Bab el Mandeb Straits open for more or less energy flows, the US war against Iran and Yemen, in parallel with the US-NATO war against Russian oil tankers at sea and domestic Russian refineries, has already begun to destroy the global demand for crude oil and petroleum products. The outcome in the short and medium term: the oil marker price isn’t going steadily upwards, but the country-by-country GDP projection is going steadily downwards into recession.
For US voters preparing for the November 3 congressional elections, this is obvious. Not only has the ratio of disapproval to approval of the Trump Administration’s performance on inflation reached a record high of minus 42%; so too is the disapproval of Trump’s performance on the economy.
In contrast to the JP Morgan report, Nabiullina of the Central Bank was emphatic in her report of September 30 that she knows all there is to know. There are four scenarios for the 2027-29 period, she claimed — a risk scenario, a proinflationary scenario, a deflationary scenario, and a baseline. Nabiullina was confident her baseline will come true. “The Bank of Russia considers the baseline scenario to be the most probable one. As for the disinflationary and proinflationary scenarios, the latter is more likely. The probability of the risk scenario remains low.”
In case she is wrong on the baseline, she also announced that it won’t be her fault – it will be the mistake of the Russian Ministry of Finance and the result of external, global factors. “The fiscal policy-related assumptions of the baseline scenario rely on public comments by the Ministry of Finance regarding the structural primary deficit of the federal budget. The baseline scenario assumes that the deficit will be decreasing gradually and reach a zero level in 2029. The forecast calculations are based on the assumption that the structural primary deficit will equal 2% of GDP in 20266, 1% of GDP in 2027, and 0.5% of GDP in 2028.”
Because the rising budget expenditures on the war in the Ukraine are pushing on the deficit, Nabiullina is implying – as she has done from before the Special Military Operation commenced – that she wants the war to end this year (on US, European and Ukrainian terms) and is opposed to the General Staff, Defense Ministry and Security Council plan to fight on.
Nabiullina buries the recession for the Russian economy in her risk scenario projection – minus 8% to minus 9% GDP contraction in 2027. That will come with collapsing consumer spending and capital investment. The baseline projectionfor GDP is close to zero this year and no better than plus 2.5% next year. “The baseline scenario assumes that the supply shocks that emerged in 2026 due to the temporary contraction of production capacity in certain industries will be transitory” – that’s Nabiullina’s alibi for the disinvestment her high Central Bank interest rates has caused.
“As regards external conditions, the baseline and disinflationary scenarios assume that the current trends in the world economy and the sanction pressure will remain almost unchanged…Whatever the scenario,” she has concluded, “the Bank of Russia’s monetary policy will be aimed at returning inflation to 4% and stabilising it sustainably close to this level. The complex of measures and decisions made will be adjusted depending on the state of the Russian economy, inflation trends, and the main indicators in financial markets.
That’s CBR-speak for saying Nabiullina doesn’t know what will be happen after she comes to the end of her term in June 2027.
The Kremlin-backed security analysis platform, Vzglyad, is also insisting that the bad news for the enemy states can only be good news for Russia’s warfighting strategy. Ignoring the demand destruction line from JP Morgan, Vzglyad has just published its report headline: “The depletion of global oil reserves plays into Russia’s hands.”
President Vladimir Putin was more sanguine in his speech to the Valdai Club on Thursday (October 1): “Whatever scenario unfolds in the world in the years ahead, the international conflicts, unfortunately, are likely to continue. This is due in part to the fact that the profound shifts now under way, and the opportunities they create, fuel and encourage ambitions and a willingness to take risks for what may appear to be a major payoff. I wish I were wrong in this assessment, but the sustainable trends we are witnessing, unfortunately, suggest otherwise.”
The JP Morgan report warned that know-nothing is now more realistic than positive oil supply and demand projections, according to the indirect quotes. “Anyone printing a single 2027 average [for oil and gas prices] today is choosing a peace date. JP Morgan’s peace date is not a market input anymore.”
Source: https://vz.ru/economy/2026/10/1/1457039.html
Translation is verbatim; illustrations and captions have been added.
October 1, 2026
The depletion of global oil reserves plays into Russia’s hands.
By Olga Samofalova
U.S. oil reserves have fallen to their lowest level since 1982. They have been actively draining stocks to curb price growth. Without this, oil prices would have surged even higher. However, the last authorized tranche of fuel withdrawals from reserves has been used. How will the U.S. get out of this situation?
Oil reserves in the American storage have dropped to 284 million barrels, the lowest level since 1982. The United States has allocated the last batch of crude oil from reserves as part of the global agreement. In March, Washington agreed to provide 172 million barrels from its reserves as part of an agreement with 30 countries of the International Energy Agency (IEA), providing for the release of 400 million barrels from global reserves.
Source: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCSSTUS1&f=M Kpler reports that “around one third of 58 Mbbls of SPR releases have been exported. Cushing inventories approaching operationally low levels have tightened price spreads As a result, US crude exports in June are set to be closer to pre-conflict levels. Total US crude inventories have fallen by 86 Mbbls since late March, with consistent draws set for June despite lower US crude exports.” https://www.kpler.com/blog/spr-gom-grades-drive-on-record-us-crude-exports-but-downside-awaits
At the same time, the United States is complaining that European countries that are IEA members have provided only a small portion of the promised oil and petroleum products. The White House is demanding that the EU reduce its emergency diesel fuel reserves to lower prices.
Meanwhile, the EU has calculated that since the start of the war between the United States and Iran, it has spent 100 billion euros more on importing fossil fuels, even though the volume of purchases has not changed. The fuel crisis is much more severe for the EU than for the United States, and Brussels has fewer options for manoeuvering.
Moreover, the EU is creating additional problems for itself. It’s not even about the ban on the import of Russian petroleum products, which was introduced back in 2023. It’s about the EU’s ban on buying petroleum products made from Russian oil in third countries. By doing so, they have reduced their own fuel supplies from Turkey and India and ended up with record prices for both gasoline and diesel.
Source: https://ycharts.com/indicators/european_union_oil_and_petroleum_product_imports_from_turkey
The release of oil from the strategic reserves of the United States and other countries, of course, has been holding back the rise in oil prices. “At the very beginning of the Middle East conflict, the oil stored on tankers outside the Strait of Hormuz, including Russian and Iranian oil, was being consumed. Off the coast of India, there were almost 100 million barrels of our oil. Later, oil from the strategic reserves of the United States, Europeans, and other consumer countries began to be consumed more actively. However, the reserves are not infinite. The US has 284 million barrels left, but a number of American experts say that 200 million is essentially the minimum volume, and it’s impossible to extract more without harming the operation of the strategic reserves. Therefore, in reality, there isn’t that much oil left in the reserves,” says Igor Yushkov, a leading analyst at the National Energy Security Fund and a senior lecturer at the Department of Political Science at the Financial University under the Government of the Russian Federation (FNEB). The expert notes that without the withdrawal of these strategic oil reserves, there would be a much more severe fuel crisis, and oil would be much more expensive than it is now.
What else can the Americans do to curb the prices that are hurting Donald Trump’s popularity at home?
“First, as prices continue to rise, more and more new projects in the United States will become profitable. Shale oil production in the United States is very dynamic, unlike conventional deposits in a number of other countries, for example, on the Brazilian shelf. American shale producers can ramp up production very quickly. Therefore, if prices rise in the future, the Americans will be able to produce more themselves,” says Yushkov.
Source: https://www.eia.gov/todayinenergy/detail.php?id=54179
Source: https://thundersaidenergy.com/2023/09/14/shale-oil-fractured-forecasts/
But, of course, the main thing the US can do is resolve the crisis with Iran through agreements on a ceasefire and the unblocking of the Strait of Hormuz.
“Another option is that the US could launch strikes against the Yemeni Houthis so that they don’t attack the East–West oil pipeline and don’t prevent Saudi Arabia from exporting oil, at least via the Red Sea. So, in fact, there are quite a few options related to the Middle East,” says the expert at the FNEB. In the end, Yushkov does not rule out that Washington may freeze part of the anti-Russian sanctions so that Russia can increase oil production and exports.
However, it is difficult for Americans to manoeuver production in Venezuela. They would need to invest 100 billion dollars there to increase production by only 1.5 million barrels per day by 2030. In the current crisis, Venezuela is definitely not a help.
Another option the US wants to pursue is to increase the supply of oil on the market through the Europeans. That is precisely why Washington is ordering Europeans to use oil from their strategic storage facilities more actively, even though the EU’s reserve volumes are much smaller. “Later, it will be possible to sell even more American oil to Europeans to replenish their reserves. Plus, Brussels will become even more compliant and dependent. Therefore, no matter how you look at it, the Americans benefit from the depletion of Europe’s strategic oil reserves,” explains Yushkov.
Source: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Emergency_oil_stocks_statistics
Source: https://www.reuters.com/business/energy/eus-emergency-diesel-stocks-are-mainly-germany-france-2026-10-01/
The depletion of strategic oil reserves will now become an important factor in maintaining high oil prices even after the peace agreement and the opening of the Strait of Hormuz.
“The volumes that have now been withdrawn from strategic storage facilities will need to be replenished. The demand for oil will be high because it will be necessary to buy oil not only for current consumption, but also to replenish strategic reserves. In addition, Pandora’s Box has been opened, which means that such crises can happen again. And those who already have strategic reserves will not only replenish them but also expand them. In China, they reach 1.4 billion barrels of oil. Those who did not have strategic reserves will try to build them up to some extent. All of this will maintain high demand for oil for quite a long period of time. In 2027, the factor of replenishing strategic reserves will be one of the main ones that will keep prices on the global market at a high level,” the source concludes.
Therefore, in general, the depletion of strategic reserves in consumer countries is a benefit for importers, including Russia, in the long term.
