The International Energy Agency (IEA) has lowered its forecast for a global oil surplus in 2026 for the first time since May, citing stronger worldwide economic conditions and reduced supply from countries under sanctions.
In its latest monthly oil market report, the Paris-based agency said that global oil supply in 2026 is expected to exceed demand by 3.84 million barrels per day (bpd). This is slightly lower than its earlier estimate of 4.09 million bpd made in November.
Even with the reduction, a surplus of nearly 4 million bpd—about 4% of global oil demand—is still considered high. Oil prices continued to decline on Thursday, with Brent crude trading below $62 per barrel, marking a sharp fall of over 15% in 2025.
OPEC+ Pauses Output Expansion
Oil supply rose significantly this year due to increased production from OPEC and its partners (OPEC+), along with higher output from the United States and other producers.
However, OPEC+ has decided to pause any further output increases in the first quarter of 2026, which may help stabilize the market.
Demand Rising as Economic Conditions Improve
The IEA revised its global oil demand forecast upwards for both 2025 and 2026.
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2026 demand is now expected to grow by 860,000 bpd, an increase of 90,000 bpd from last month’s forecast.
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2025 demand is expected to rise by 830,000 bpd, up 40,000 bpd from the previous estimate.
The agency said that easing tariff-related concerns, lower oil prices, and a weaker U.S. dollar—both now at near four-year lows—are boosting demand. Most of the growth is coming from non-OECD countries, where fuel consumption is closely linked with economic trends.
Sanctions Reduce Russian and Venezuelan Supply
The IEA also reported that global oil supply is expected to grow by 2.4 million bpd next year, slightly lower than the earlier estimate of 2.5 million bpd.
This reduction is mainly due to sanctions that continue to affect exports from Russia and Venezuela.
In November alone, global supply fell by 610,000 bpd, driven mostly by declining output in these two countries. Russia’s export revenues also dropped to their lowest since the start of its full-scale invasion of Ukraine in 2022.
Strong Output from the Americas
While OPEC+ output is expected to drop, the IEA kept its production forecast stable for non-OPEC+ countries. Rising output from the U.S., Canada, Brazil, Guyana, and Argentina is expected to balance some of the supply loss.
Tight Fuel Markets to Continue
The IEA highlighted a growing trend of “parallel markets,” where crude oil is plentiful but refined fuels remain tight. This is due to limited refining capacity outside China and EU sanctions on Russian fuel exports.
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