IEA Raises Estimate for Record Oil Glut in 2026

A record oversupply of oil will be bigger than previously estimated and the excess is already starting to build up on ocean going tankers, the International Energy Agency said.

World oil supply will exceed demand by almost 4 million barrels a day next year, an unprecedented overhang in annual terms, the IEA said in its latest monthly report. Its predicted surplus is up roughly 18% from last month’s estimate, as the OPEC+ alliance continues to revive output and the outlook for the group’s rivals in 2026 strengthens. 

While inventories have piled at a brisk clip of 1.9 million barrels a day this year, their impact on prices has been mitigated by China scooping up the majority, according to the report. That’s beginning to change as a surge in Middle East exports pushes the volume of oil on the water to the highest level in years, the IEA said. 

“Looking ahead, as the significant volumes of crude oil on water move onshore to major oil hubs, crude stocks look set to surge,” the Paris-based agency adviser to major economies said. It trimmed consumption growth estimates slightly for this year, and boosted non-OPEC supply estimates for this year and next.

The surplus is building as demand growth in China and other key consumers cools, while the OPEC+ alliance revives halted production and the group’s rivals in the Americas continue to expand rapidly. Crude futures are trading near $63 a barrel in London, down 15% for the year.

While Wall Street firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co. predict further losses, the market has so far been spared the crash that some anticipated when Saudi Arabia and its partners starting opening the taps earlier this year.

That’s partly because much of the supply excess has been in the form of natural gas liquids, or NGLs, used as petrochemical feedstock, rather than crude, the IEA said.

The market for these and other oil products may draw support going forward from the loss of supplies from Russia, upcoming European Union restrictions on using Russian feedstocks and recent refinery closures, the agency added.

Global oil demand will increase by just 700,000 barrels a day this year and next, far below historical trends, as trade tariffs darken the macroeconomic backdrop and the shift toward electric vehicles gathers pace.

At the same time, supplies from outside the Organization of the Petroleum Exporting Countries and its partners will grow by roughly double that amount, led by the US, Brazil, Canada, Guyana and Argentina. Non-OPEC+ supply will increase by 1.2 million barrels a day next year, up roughly 200,000 a day from the IEA’s estimate last month.

Key OPEC+ nations continue to revive halted production in an apparent bid to reclaim their share of global oil markets. The alliance’s output surged by almost 1 million barrels a day in September as Saudi Arabia led members in completing the restart of a first supply tranche, the IEA said.

The IEA’s estimate for oversupply in 2026 would be the biggest ever across a year. There were individual months in the height of the Covid pandemic in 2020 when the excess was bigger.

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