IEA Cuts Forecast of Record Oil Glut for 1st Time Since May

The International Energy Agency trimmed estimates for a global oil supply surplus this year and next for the first time in several months as demand strengthens and output growth slows.

World supplies will exceed demand by 3.815 million barrels a day in 2026, which would still mark a record, but trims last month’s estimate by 231,000 barrels a day. It’s also the first reduction since OPEC+ started ramping up production in May, while an estimate for this year’s overhang was curbed for the first time since February.

The revision by the IEA — whose forecasts are used by the global oil industry and governments alike — reflects several factors: last month’s decision by OPEC+ to pause supply increases, slightly reduced estimates for the group’s rivals and a stronger outlook for world oil consumption.

“The projected global oil surplus in the fourth quarter of 2025 has narrowed since last month’s report, as the relentless surge in global oil supply came to an abrupt halt,” the Paris-based agency said in a report. Meanwhile, “an improving macroeconomic and trade outlook” are buoying demand.

Expectations for a world supply excess — which top trader Trafigura Group warned could turn into a “super glut” — have been weighing on prices ever since the OPEC+ alliance led by Saudi Arabia agreed to open the taps earlier this year. Brent futures traded below $62 a barrel on Thursday, down 17% this year. 

Despite the revision, the supply excess anticipated by the IEA next year would be unprecedented in annual terms, surpassed only during the depths of the Covid pandemic when demand crashed in 2020. The agency has said actual volumes may fall short of the overhang projected on paper, as crude producers make adjustments. 

The accumulation of oil inventories to a four-year high — including a steep build-up of supplies on the world’s seas — isn’t yet showing up clearly in the main storage hubs, partly because so much of the excess comes from sanctioned producers Iran, Russia and Venezuela, the IEA said. It’s also at odds with tightness in markets for some oil products, which has been driven by constraints on refinery capacity. 

The narrowing of the expected surplus this quarter stems from a “whopping” decline in world supplies, which are down by 1.5 million barrels a day from the record levels reached in September, according to the agency. Production dropped in sanctioned OPEC+ nations Russia and Venezuela, while their counterparts Kuwait and Kazakhstan experienced unplanned outages.

Separately, US forces intercepted and seized a sanctioned oil tanker off the coast of Venezuela on Wednesday, which may make it harder for the nation to export its crude, as other shippers are now likely to be more reluctant to load its cargoes.

Key members of the Organization of the Petroleum Exporting Countries and its partners have also made a policy choice to halt further production increases during the first quarter, following a surprisingly speedy ramp up earlier this year. They cited a seasonal demand slowdown for the decision.

The IEA slightly bolstered forecasts for growth in global oil consumption to 830,000 barrels a day in 2025 and a little more in 2026. World oil demand will average a record 103.9 million barrels a day this year.

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