IEA Sees Fourth-Quarter Oil Surplus as Supply Rises to 105.4 Million Barrels
Key Facts
The International Energy Agency expects the global oil market to return to surplus in the fourth quarter of 2026, as supply recovers faster than demand grows, according to its November report published on November 13. Global supply rose by 2.3 million barrels per day in October to 105.4 million barrels per day, after an increase of 3 million in September. The agency said the rapid recovery in Gulf exports helped lift supply, while inventories are set to increase during 2027. The outlook puts the market balance on course to shift from the tightness caused by supply disruptions to an expected surplus at year-end. But the report also records continued declines in onshore inventories, showing that improved oil flows have not erased the impact of accumulated shortages.
Oil exports from the Gulf, excluding Oman, reached 18.4 million barrels per day in October, but remained 26% below pre-war levels. Crude led the recovery, with flows rising to 15 million barrels per day, or 82% of their pre-war level. The report says exports are recovering faster than demand is growing, supporting its forecast of a fourth-quarter surplus. Exports have yet to regain their previous levels, however, and the agency said continued attacks on shipping threaten the security of navigation, a key factor in sustaining the recovery in supply. Gulf flows therefore remain dependent on shipping continuing to operate safely.
Russia also recorded an increase in crude oil production, reaching 8.73 million barrels per day in October, compared with 8.52 million in September. Across the global market, supply rose by 5.3 million barrels per day since August, narrowing its year-on-year decline to 2.9 million barrels per day in October. The average year-on-year production loss was 8 million barrels per day from March to September. The agency raised its fourth-quarter 2026 supply estimate by 3.3 million barrels per day. It also expects the United States, Canada, Brazil, Argentina and Guyana to increase their combined production by 1.6 million barrels per day during 2026.
On the demand side, the agency expects global consumption to fall by 2.7 million barrels per day in 2026 to 102.3 million barrels per day. It then expects demand to rise by 2 million barrels per day in 2027, shifting from contraction to growth around March. This trajectory puts next year’s demand recovery below the projected increase in supply, which the agency says will reach 6.6 million barrels per day, bringing the average to 108.1 million. Gulf production accounts for 5.3 million barrels per day of the projected supply increase in 2027. This forecast gap highlights the importance of balancing the return of production with consumption growth in determining the size of the anticipated surplus.
Inventory data showed a mixed picture in October. Observed oil stocks rose by 52 million barrels, or 1.7 million barrels per day, marking the first increase since June. But stocks in OECD countries fell by 47 million barrels during the month, while onshore inventories continued to decline and remained at their lowest level since at least 2016. Since the start of the war, observed global inventories have fallen by a cumulative 462 million barrels. Oil in transit by sea also rose by 86 million barrels in October to its highest level since January, as Gulf crude exports strengthened. The increase in floating volumes reflects improved flows, while onshore stock levels show the continued impact of earlier drawdowns.
Prices fell alongside the recovery in exports, with dated North Sea crude dropping 32% from a peak of $136 a barrel in early October to $93 a barrel when the report was prepared. European diesel fell 11% over the same period, but remained near $180 a barrel, 77% above pre-war levels. In EL7’s daily data, Brent was at $95.82 a barrel on November 12, compared with a close of $92.57 on November 9. Global refinery runs fell by 1.3 million barrels per day month on month to a seasonal low of 81.3 million in October. The agency expects them to rise to 84.7 million barrels per day in December, as crude availability improves in Asia and new Chinese product export quotas may support regional operations.
On supply security, the agency said its members had released about 330 million barrels from stocks by October 15 and agreed to complete the release of about 100 million barrels still remaining. This includes more than 20 million barrels of diesel as soon as possible. The agency expects Atlantic Basin refineries, particularly in the United States, to support supply, alongside improved crude availability in Asia. But it warned that continued attacks on shipping leave downside risks in place, because safe navigation is essential to a sustainable recovery in supply. In 2027, the agency expects global supply to rise by 6.6 million barrels per day to an average of 108.1 million, including an increase of 5.3 million from Gulf production, while demand grows by 2 million barrels per day.