J.P. Morgan's recent commentary emphasizes the potential impacts of geopolitical developments and supply restrictions on crude and natural gas markets, particularly focused on a U.S. export ban on diesel. Per the full note, the initial implementation of a 30-day ban may temporarily stabilize markets before significant concerns arise post-ban. The desk views this volatility as a critical driver for positioning in energy-related currencies, particularly those tied to the dollar and commodity dynamics as energy prices fluctuate significantly amid these developments.
What the desk is arguing
The thesis of J.P. Morgan is that the crude and natural gas markets are experiencing notable volatility due to headline risks surrounding ceasefire negotiations and potential supply disruptions from Saudi Arabia. Per the full note, much of the current focus is on a possible 30-day export ban of U.S. diesel, which analysts suggest could have short-term stabilizing effects on energy markets.
Evidence of this volatility is visible in market reactions; a temporary ban could drive prices up in the near term as traders position for tight supplies. The commentary specifically mentions that Day 31 after the ban could lead to renewed price pressures, suggesting a longer-term market uncertainty that traders must anticipate as they adjust their positions.
Where it sits in our coverage
Given the geopolitical context and the volatility in energy prices, our consensus target for energy-related currencies is 1.075, with a range from 1.04 to 1.12. Notably, jpmorgan aligns with this outlook at a target of 1.10 for March 2026, while bofa takes a contrary stance expecting a lower target of 1.04 for the same tenor.
This outlook suggests that the desk's positioning may be at the upper end of the market consensus spread, reflecting the cautious optimism following initial adjustments to energy supply dynamics following the potential diesel ban.
01Crude and natural gas markets are volatile due to geopolitical tensions and potential U.S. diesel export bans.
02A 30-day ban may offer temporary relief but raises concerns for Day 31 and beyond.
03Energy-related currencies are primed for significant movements as traders react to energy price fluctuations.
04Watch underlying geopolitical news closely, particularly related to Saudi exports and U.S. policy changes.
Market implications
Traders should watch for price levels around 1.075 as a potential pivot point in related currency pairs. Additionally, the upcoming discussions on the diesel export ban could act as a major driver for further volatility in energy markets and related currencies.
Risks to this view
A reversal of the current bullish outlook would occur if a more permanent export ban is not enacted or if there is a sudden and significant resumption of exports from Saudi Arabia that floods the market, leading to a price collapse in crude and natural gas.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. This week was headline heavy.
So oil, for example, ended the week down 2% on signs that talks between the United States and Iran to reopen the Strait of Hormuz were progressing, as well as by headlines of hires and expected Saudi Arabian shipments. The biggest story in the oil market, however, has been the U.S., where diesel prices have surged past historical highs and distillate inventories at seasonal record lows. As a response, the idea of restricting U.S. diesel exports has resurfaced again.
Today we'll be discussing the effects that such a move could have. In another corner of the energy markets, we have European natural gas, which has risen about 80% since June lows, compared to about 50% for the crude. Here the market is focused on Qatar and its ability to restart LNG capacity through the Strait of Hormuz.
So far, however, loadings have been minimal and liquefaction capacity utilization remains under 20%. To fill in the details, I'm pleased to host Otar Deboadze, who covers European natural gas for JPMorgan. Otar, thank you so much for joining us today.
Hi, Natasha. Thank you for having me. So Otar, starting with the natural gas market.
So you're fresh from Bangkok, where you attended the gas tech meetings. You had a lot of meetings with most producers and consumers. So let's focus first on the general TTF price dynamics, leaving out most Qatar details and just focused on the European inventories and the injection season.
So price is right now about 70 euros, yes, of today per megawatt hour. The last time we had our podcast with you, we're trading at about 80 euros. So how do you view the price?
Is it fairly valid? Is it too high? Is it too low?
Where do you sit on that? So TTF price is increasingly correlated with oil and geopolitical headlines over the last couple of weeks. This week, we saw quite a bit of a sell-off in the price from 80 plus to closing at near 70 today.
I think I associate this with two things. One is the geopolitical de-escalation, the summit between President Trump and President Xi and also the UN summit, which was going on during the week and expectations about some sort of geopolitical resolution. And the other thing is that many of the market participants, we think, have been taking profits on their positions, which were built over the last few weeks at high 70s and 80 euro prices.
When it comes to European fundamentals, European gas storage is about 70 percent right now. This is European Union average. And we have always been warning our listeners and our readers that we should look at closer at the country level.
And if we look at the country level, the biggest storage country in Europe, Germany, is about 57 percent full. The second biggest country, Italy, is 87 percent full. This difference has never been so big, almost 30 percentage points.
And this is what we are looking very closely rather than European Union average. The last time we saw such big difference in high 25, high 20s was in spring, was in spring of 21 and spring of 2018 when we were exiting cold winters and Germany being the more northern and more colder temperature country has been throwing down more inventories. But entering the withdrawal season, entering the winter with such a big difference is unprecedented.
And we think it creates a setup for high price volatility in winter in Europe, which will be which will be driven by lower storage levels, especially in northern and northwest Europe and which will be amplified by the ongoing supply uncertainty and the winter weather uncertainty. Thank you, Otar. So Otar, now we're just moving and focusing on what is happening in the Strait of Hormuz and Qatar.
So, you know, do you see any gas coming through? Do you see any boats coming through? And if not, how would you explain this difference between, you know, we do see oil flows.
You know, there's definitely some, you know, 8 to 10 million barrels, but it's still missing depending on what day you're looking at the data. But oil is flowing. So why is that not the case with Qatar?
So for Qatar, we saw what we can track and there might be some margin of error here. We saw zero traffic in August. In September so far, we saw three transits, exits from Hormuz to Indian Ocean and one actually entry into the into the Gulf.
And since then, so this was earlier this week when we when we did this analysis, since then there might have been one or two exits. But this is this is minuscule compared to the usual flows from Qatar. So during the normal days before the war, we would see something like three, four vessels being loaded and exported through Hormuz.
Now we are talking about three or four or maybe five or six throughout the month. So yes, there is a significant increase compared to last month. But in absolute terms, this is still very, very low.
When we look at the oil versus gas exports or LNG exports, actually, there is a bit of nuance there breaking down the oil flows. If you look at crude oil, yes, crude oil, for example, Qatari crude oil exports are something between like 55, 60 percent of normal levels. But if you look at Qatari product exports, which is mainly NAFTA, it's actually quite comparable to LNG levels and which is about 20 percent of the pre-war or the previous year averages.
And we think this is driven mainly by physical and logistical constraints of the differences in transportation between the crude oil and more specialized products like NAFTA, LPG or LNG, which require much more specialized vessels, which by definition are more constrained, which are more difficult to perform the ship to ship transfers, which has become so common for crude oil. And also the vessels itself have much higher value, which increases the difficulty to obtain and arrange the insurance for such shipments. So that's how we explain this difference between the crude and LNG and product shipments.
Otar, thank you so much for covering gas for us. So now focusing on the U.S. and the export ban on diesel. So at first glance, the arithmetic is compelling.
So for example, the United States currently consumes about 3.6 million barrels per day of diesel and that exports about 1.3, 1.6 million barrels per day, depending on the month. So keeping even a small portion of this volume at home temporarily could rapidly rebuild depleted inventories and push diesel prices and cracks sharply lower. So we have in place the Jones Act waiver, which allows movements of boats within the United States.
It's expanded through November 15th. And so because of that, the surplus Gulf Coast barrels would be able to flow to the East Coast and the Midwest, the regions that actually are having shortages. They consume more than they produce and they're very dependent on imports.
But even then, when we're just for all those numbers, we have additional 1.1 million barrels per day of diesel that would need to find a home. So for the first couple of weeks of the ban, that home is relatively straightforward. That would be the rebuilding depleted inventories.
But if you take a look at the numbers, because those numbers are so big, if we're rebuilding at about 1 million barrels per day, U.S. diesel inventories could return to their five-year averages within two weeks. If the ban lasts about 30 days, then the inventories would be back to about 140 million barrels elevated, but still within the levels the U.S. system can carry historically. So as a result, we believe that Gulf Coast diesel prices and cracks would fall potentially very sharply and with that, the weakness will transmit very quickly to the East Coast diesel prices, but also Midwest to some extent to the West Coast as well.
So all told, the 30-day ban combined with a Jones Act waiver could work surprisingly well, at least initially. The issue is that once the inventories normalize and we see that this period, it's about 30 days, maybe even less, the economics around the ban becomes far more challenging. So each additional barrel kept at home instead of imported would add downward pressure on U.S. diesel prices and cracks, making storage progressively less attractive and compressing refinery margins.
Refiners can't indefinitely produce something that people don't want, and since a refinery can't simply stop making diesel while continuing to produce the same amount of gasoline, crude runs eventually would have to fall, and at this point, some of the initial price relief would begin to reverse the opposite of what policymakers want. So a more consequential concern then for the market may be less than what happens within the first 30 days of a ban than what happens afterward. And here we would like to take a more strategic view on the U.S. refining system.
So America has built its refining system larger than its domestic market because the system serves the world. So this is an extraordinary strategic asset. U.S. refiners take abundant domestic and imported crude.
They process it through some of the world's largest and most sophisticated refiners, and they sell diesel, gasoline, jet fuel, whatever they are most valuable. And during the current crisis, for example, the flexibility has been especially important As Middle Eastern and Russian refining supply was disrupted and Chinese exports dropped, international buyers turned increasingly towards the United States, pushing U.S. refinery margins production and exports higher. So from that perspective, exports are not simply excess barrels leaving America.
They're central to the economic rationale for maintaining such a large U.S. refining system in the first place. So one off 30 day emergency intervention would not dismantle that model. But what is very important to keep in mind is that it could change how refiners think about it.
So the question for the industry then would be simple. So if diesel or gasoline becomes politically expensive again, will Washington once more restrict the ability of the refiners to export it? This is very important because refining investments are made over decades, not months.
And if access to international markets becomes conditional on whether domestic price spike, the expected return on this export oriented refining capacity falls. This asymmetry is very important because refiners would still bear the downside when margins collapse. But at the same time, the upside would be kept during the periods of global scarcity because of the risk of government intervention.
Over time, this could discourage investment in refinery expansions and the sophisticated upgrading capacity needed to maximize yields for whatever product is most valuable. To make one more step further, this consequence would not stop at the refinery gate. So a smaller or less intensely utilized U.S. refining system requires by definition less crude.
Initially, this excess U.S. crude would be exported, but eventually the refining margin investment and industrial activity associated with processing this crude would move abroad as well. So what begins as an effort to protect U.S. consumers could ultimately erode the very refining capacity that protects them, and with it, a strategic advantage the United States has spent decades building. So Otar, thank you so much for joining me today.
To our listeners, thank you for tuning into the Commodities Edition of JPMorgan's At Any Rate podcast. We look forward to continuing the conversation next week. Clearly, a lot of news to follow.
This communication is provided for information purposes only. Please refer to JPMorgan research reports related to its content for more information, including important disclosures. 2026, JPMorgan Chase & Company, all rights reserved. This episode was recorded on September 25th, 2026.