Oil Supply to Reach 105 Million Barrels a Day in Q4, Exceeding Demand by 1.7 Million
Key Facts
The International Energy Agency said in its report published on November 13 that the global oil market would return to surplus in the fourth quarter of 2026, after supply exceeded demand for the first time since the outbreak of the war in Iran. The agency estimated average supply during the quarter at 105 million barrels a day, 1.7 million barrels a day above expected demand. That marks a reversal in the market balance compared with its previous forecast, which pointed to a supply deficit in the fourth quarter. The shift came as oil flows recovered, while concerns about refined products persisted. The agency singled out diesel as one of the market's main areas of tightness.
Global supply growth accelerated in October, rising by 2.3 million barrels a day to 105.4 million barrels a day, following a larger increase of 3 million barrels a day in September, the agency said. This coincided with a recovery in Middle Eastern exports at a faster pace than growth in global oil demand, despite continued attacks on shipping, Reuters reported, citing the report. The figures show that the increase was not confined to a single month, with October's rise following gains recorded in the previous month. The return of regional exports also boosted market supply at a time when global demand was growing more slowly. The agency's previous fourth-quarter forecast had assumed a deficit before its new estimates reversed the outlook to a surplus.
The surplus outlook is also linked to a change in the expected path of demand. The agency expects global oil demand to fall by 2.7 million barrels a day in 2026 to 102.3 million barrels a day, before rebounding by 2 million barrels a day in 2027. In separate estimates released on November 10, the U.S. Energy Information Administration said global inventories fell by an average of 1.2 million barrels a day in the third quarter of 2026, but would begin rising in the fourth quarter as production exceeds consumption. The two forecasts place the fourth-quarter surplus in the context of a market shifting from inventory draws to builds. The EIA cautioned, however, that supply disruption risks and longer shipping routes could limit the near-term effect of higher inventories until geopolitical risks ease and inventories approach pre-conflict levels.
For products, the International Energy Agency said acute supply tightness, particularly in diesel, remained the main concern, and that attacks on Russian infrastructure were hindering Russian diesel from reaching international markets. The expected abundance of crude therefore contrasts with the state of refined products: a crude surplus does not automatically mean the end of tight supplies in the diesel market. Data for the U.S. heating oil futures contract, which is linked to low-sulfur diesel, showed a settlement at $4.31 a gallon on November 13, compared with $4.2865 in the previous session. These are futures contract prices, not retail prices. The agency said refining margins weakened in October while pointing to tight product supplies; it did not link lower inventories or margins to diesel costs remaining high.
The agency's report affected the crude market during the November 13 session, with prices retreating from earlier gains after its release. Brent crude was down 0.1% at $95.71 a barrel at the time of the report, Reuters said. Crude moved on a day when supply estimates pointed to the market returning to surplus, while concerns about products and shipping remained in the background. On the supply side, OPEC+ crude production reached 41.23 million barrels a day in October, up about 2.04 million barrels a day from September, equivalent to 97% of the February level before the war, according to OPEC data cited by Reuters. JPMorgan also forecast a global surplus of 1.4 million barrels a day in October, according to the same report.
Attention now turns to emergency supplies scheduled to become available by the end of February 2027. The agency said, according to Reuters, that 71 million barrels of pledged reserves would be available by then, including 15 million barrels of diesel to ease tight market conditions. The release sets a specific date for adding volumes to the market, with part of the supply allocated to the product the agency described as the main area of concern. The outlook for improved inventories also remains tied to the course of supply and shipping disruptions, as the EIA warned that geopolitical risks and longer routes would limit the impact of inventory accumulation in the near term. The picture therefore combines an expected crude surplus in the fourth quarter with continued tightness in diesel and oil products.