(Bloomberg) – Global oil markets are on track for a record surplus next year as demand growth slows and supplies swell, the International Energy Agency said.
Oil inventories will accumulate at a rate of 2.96 million bpd, surpassing even the average buildup during the pandemic year of 2020, data from the IEA’s monthly report showed. World oil demand this year and next is growing at less than half the pace seen in 2023.
At the same time, supplies are booming. The OPEC+ coalition, led by Saudi Arabia, has fast-tracked the restart of halted production, and the IEA has slightly bolstered forecasts for output outside the group in 2026, led by the Americas.
“Oil-market balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026,” the Paris-based agency said. “It is clear that something will have to give for the market to balance.”
Crude prices have declined roughly 12% this year, trading near $66 a barrel in London, as increasing supplies from both OPEC+ and its rivals coincide with deepening concern that U.S. President Donald Trump’s trade war will impact economic growth.
The price retreat offers some relief for consumers after years of inflation, and a win for Trump as he pushes for lower fuel costs, but poses a financial threat for oil-producing companies and countries.
High stockpiles
Oil markets are drawing some support for the time being from strong summer demand for driving fuels, but the IEA’s data suggest they’re already tipping into oversupply. World oil inventories reached a 46-month high in June. New sanctions on Russia or Iran could still change the picture, the agency added.
On a quarterly basis, the surplus seen in 2020 would remain the biggest on record, peaking at more than 7 million barrels a day in the second quarter of that year as lockdown measures curtailed transportation and economic activity. That glut was subsequently pared by massive OPEC+ cutbacks.
Global oil consumption will grow by just 680,000 bpd this year, the weakest since 2019, amid disappointing demand in China, India and Brazil. It will expand by 700,000 bpd in 2026, according to the report.
The IEA boosted forecasts for non-OPEC+ supply growth in 2026 by 100,000 bpd to 1 million bpd, led again by the U.S., Guyana, Canada and Brazil.
