IEA Says Global Oil Market Returns to Surplus as Gulf Exports Recover
The global oil market will return to a surplus in the final quarter of 2026, the International Energy Agency said on Friday, as exports from the Gulf recover faster than demand despite continued attacks on shipping. It is the first time supplies have outpaced demand since the war in Iran began in late February.
In its November Oil Market Report, released Friday morning, the Paris-based agency said world oil supply will average 105 million barrels a day in the fourth quarter, about 1.7 million barrels a day above forecast demand. Just a month ago, the IEA had forecast a deficit for the same period — a sharp reversal driven by the speed of the Gulf export recovery.
A rapid turnaround in supply
The turnaround has been fast. Global oil supply rose by 2.3 million barrels a day in October to 105.4 million barrels a day, following a 3 million barrel-a-day increase in September, according to the report. Supply is now 5.3 million barrels a day higher than it was in August.
Gulf crude exports, excluding Oman, have recovered to about 15 million barrels a day, or 82 percent of pre-war volumes, the IEA said. Observed global inventories rose by 52 million barrels in October, the clearest sign yet that the market is rebalancing.
The strength of the recovery prompted the agency to raise its fourth-quarter supply estimate by 3.3 million barrels a day. For 2026 as a whole, it now expects an average deficit of 685,000 barrels a day, down from the 1.7 million barrels a day it forecast a month ago.
The outlook for 2027
The IEA expects the surplus to grow next year. Global supply is projected to rise by 6.6 million barrels a day in 2027 to an average of 108.1 million barrels a day, led by a further recovery in Gulf production. Demand is forecast to rebound by 2 million barrels a day, leaving a surplus of about 3.8 million barrels a day — slightly smaller than the 3.94 million barrel surplus the agency projected last month.
World oil demand is expected to fall by 2.7 million barrels a day in 2026 to 102.3 million barrels a day, little changed from the IEA’s previous forecast, before recovering in 2027. The annual contraction is forecast to ease to 2.7 million barrels a day in the fourth quarter, from an average decline of 4.4 million barrels a day in the second and third quarters. Petrochemical feedstocks such as liquefied petroleum gas, ethane and naphtha are expected to account for around 80 percent of demand growth in 2027 as supply chains normalize.
Other analysts have pointed in the same direction. JPMorgan forecast last week that the global market would run a surplus of 1.4 million barrels a day in October.
Why this matters for American consumers
A crude surplus puts downward pressure on oil prices, and Brent crude gave up earlier gains after the report was published, trading down 0.1 percent at $95.71 a barrel. North Sea Dated crude stood at around $93 a barrel at the time the report was written, against an early-October high of $136.
For American households, the shift comes at a useful moment. US heating bills are already set to rise this winter, and cheaper crude could ease some of the pressure on fuel costs — though a crude surplus does not automatically mean lower prices at the pump, where refining costs, taxes and local supply conditions also matter.
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The report landed in a week when the Wall Street sell-off pushed stocks lower and the 10-year Treasury yield climbed above 5 percent, a reminder that energy prices are only one part of a strained economic picture for consumers.
The recovery is not secure
The IEA was careful to qualify its forecast. The outlook for a sustained recovery depends on maritime security, and the agency warned that further attacks on shipping could undermine the rebound. The region remains dangerous: Saudi Arabia’s East-West oil pipeline was attacked near Medina earlier this month, and tanker traffic through the Gulf is still operating under threat.
Refined fuels are a second weak spot. Tight diesel supplies remain a major concern, the IEA said, even as crude exports recover. The agency expects the global diesel market to record only a modest surplus of 20,000 barrels a day in the fourth quarter, rising to 460,000 barrels a day in the first quarter of 2027.
The agency also gave more detail on the remaining volumes from a record release of emergency oil reserves pledged by its members in March. A further 71 million barrels will be made available by the end of February, including 15 million barrels of diesel intended to ease market tightness. Global refinery throughput is expected to average 81.3 million barrels a day in October before recovering to 84.7 million barrels a day in December.
Frequently Asked Questions
What does an oil surplus mean?
It means the world is producing more oil than it is using. The extra barrels go into storage, inventories build up, and the imbalance usually puts downward pressure on crude prices — the opposite of a deficit, when demand outruns supply and stocks are drawn down.
Why did the IEA change its forecast so sharply?
Gulf exports recovered faster than the agency expected a month ago. Crude shipments from the region have climbed back to about 82 percent of pre-war levels, and October supply jumped 2.3 million barrels a day, forcing the IEA to raise its fourth-quarter supply estimate by 3.3 million barrels a day.
Will gasoline and heating prices fall now?
Not necessarily. A crude surplus helps, but pump and heating prices also depend on refining capacity, diesel availability, taxes and local supply. The IEA itself warns that diesel supplies remain tight, so fuel markets may stay stressed even while crude is plentiful.
The IEA’s report marks a turning point in the oil market’s year: from a war-driven shortage to a surplus in the space of a few months. Whether it lasts will depend on two things the agency cannot forecast — the safety of Gulf shipping lanes and the pace at which demand recovers in 2027. What to watch next is the agency’s December report, and whether OPEC and its allies respond to the growing glut with fresh production cuts.
Sources: Reuters; Dow Jones via TradingView; Egypt Oil & Gas.
