IEA Sees Oil Supply Rising by 6.6 Million Barrels a Day in 2027
Key Facts
The International Energy Agency expects global oil supply to rise by 6.6 million barrels a day in 2027, to an average of 108.1 million barrels a day, according to its Oil Market Report published on November 13, 2026. The agency said the market would return to surplus in the fourth quarter of 2026, before seeing larger stock builds the following year. The projected path comes as supply recovers faster than demand growth, although the agency also expects consumption to rebound in 2027. Much of the increase in supply is concentrated in the Gulf, while a group of producers in the Americas will add further supply. Maritime security and the continued recovery in exports are factors influencing the supply outlook set out in the report.
The agency expects Gulf production to add 5.3 million barrels a day to the supply increase in 2027, while the United States, Canada, Brazil, Argentina and Guyana together contribute 1.1 million barrels a day. The estimates follow a recovery in Gulf supply in recent months, as the agency raised its estimate for global supply in the fourth quarter of 2026 by 3.3 million barrels a day, with exports accelerating faster than expected. Oil exports from the Gulf, excluding Oman, reached 18.4 million barrels a day in October, but remained 26% below pre-war levels. Crude flows reached 15 million barrels a day, equivalent to 82% of those levels. Seaborne oil also rose by 86 million barrels in October to its highest level since January, as Gulf crude exports strengthened.
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 recovering by 2 million barrels a day in 2027. About 80% of next year's demand growth is expected to come from liquefied petroleum gas, ethane and naphtha, which are used as feedstocks in the petrochemical industry. Weak demand in 2026 reflects disruption to Gulf exports of refined products and liquefied petroleum gas, which remained at about half of pre-war levels, as well as higher fuel prices. In the fourth quarter of 2026, the annual decline in demand is likely to narrow to 2.7 million barrels a day, from an average drop of 4.4 million barrels a day in the second and third quarters. Demand therefore improves toward year-end, but remains consistent with the agency's outlook for a market returning to surplus.
Global supply rose by 2.3 million barrels a day in October to 105.4 million barrels a day, after increasing by 3 million barrels a day in September. Since August, global oil production flows have increased by 5.3 million barrels a day, narrowing the annual decline in production to 2.9 million barrels a day in October, compared with an average loss of 8 million barrels a day between March and September. The agency said global supply exceeded demand for the first time since the war in Iran began. Meanwhile, observed oil inventories rose by 52 million barrels in October, their first increase since June, while onshore stocks remained at their lowest levels since at least 2016. OECD oil inventories fell by 47 million barrels, including 41 million barrels of industry stocks, while observed global inventories have cumulatively declined by 462 million barrels since the start of the war.
Dated North Sea crude fell 32% from a peak of $136 a barrel in early October to $93 a barrel at the time the report was prepared, as the recovery in Gulf exports eased market pressures. European diesel prices fell 11% over the same period, but remained near $180 a barrel, 77% above pre-war levels. These moves show a divergence between falling crude prices and refined fuel prices that remain elevated compared with pre-war levels. On the supply side, the agency cut its 2027 supply estimate by 200,000 barrels a day from its October forecast. This followed a 680,000-barrel-a-day reduction in its forecast for Iranian crude production in 2027, to 1.9 million barrels a day, amid the continuing U.S. naval blockade.
The supply recovery path depends on maritime security, the agency warned, saying attacks on ships undermine security that is essential to sustaining the recovery. In refining, global refinery runs fell by 1.3 million barrels a day month on month to 81.3 million barrels a day in October, a seasonal low. The agency expects runs to rise to 84.7 million barrels a day in December. In 2027, refinery output is likely to rise by 2.5 million barrels a day to 84.3 million, following an average annual decline of 2.2 million barrels a day in 2026. The expected return to surplus in the fourth quarter of 2026 and stock builds in 2027 remain tied to developments in exports, demand and shipping security.