Oil market to return to surplus for first time since start of Iran war, IEA says

The International Energy Agency (IEA) predicts that the global oil market will experience a surplus for the first time since the onset of the Iran war. Despite tight supplies, global oil production has outpaced demand, leading to rising inventories. In October, crude inventories increased by 1.7 million barrels per day, while Gulf oil exports, excluding Oman, reached 18.4 million barrels per day, which is 26% below pre-war levels.

This led to a narrowing of the year-on-year output decline to 2.9 million barrels per day, down from an average loss of eight million barrels from March to September. The IEA has also revised its expectations for global oil supply for the rest of 2026, forecasting a 3.3 million barrel per day increase. However, global oil demand remains subdued due to high prices and disruptions to refined products and liquefied petroleum gas exports from the Gulf, which remain at about half of pre-war levels.

While transport fuels are expected to grow modestly, diesel remains particularly tight and expensive, especially in the US, due to persistent attacks on Russian energy infrastructure. The IEA expects global oil demand to decline by 2.7 million barrels per day to 102.3 million barrels by 2026 and increase by two million barrels per day in 2027.

The agency notes that the recovery will be aided by accelerated diesel stock releases and improved crude availability in Asia, as well as Chinese product export quotas. However, various risks persist, including attacks on shipping that could further disrupt maritime security, crucial for a sustained recovery.