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Global oil market returns to surplus as Gulf exports recover – IEA – EnviroNews
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The International Energy Agency (IEA) has reported tentative signs of rebalancing in the global oil market, with supply exceeding demand for the first time since the outbreak of the war in Iran.
In its latest November 2026 Oil Market Report (OMR), the agency said global oil inventories increased by 52 million barrels (mb), equivalent to 1.7 million barrels per day (mb/d), in October as oil exports from the Gulf recovered faster than global demand.
The recovery in supplies also triggered a sharp decline in crude oil prices, with North Sea Dated crude falling by more than 30 per cent from a peak of $136 per barrel on October 8 to approximately $93 per barrel at the time of the report.
However, the IEA noted that prices remained $22 per barrel above pre-war levels, reflecting continued uncertainties in the global oil market.
According to the report, global oil supplies surged by 2.3 mb/d to 105.4 mb/d in October, bringing the increase in output since August to an extraordinary 5.3 mb/d.
The development narrowed the year-on-year decline in global production to 2.9 mb/d, compared with an average loss of 8 mb/d between March and September.
The agency attributed the recovery largely to increased oil exports from Gulf producers, although attacks on tankers continued to pose risks to maritime transportation.
Gulf oil exports, excluding Oman, rose to 18.4 mb/d in October, representing 26 per cent below pre-war levels. Crude oil shipments accounted for much of the recovery, increasing to 15 mb/d, equivalent to 82 per cent of pre-war volumes.
The improved export performance prompted the IEA to raise its global oil supply estimates for the fourth quarter of 2026 by 3.3 mb/d.
The report projected that global oil supply would decline by an average of 4.8 mb/d in 2026, as production losses in the Middle East and Russia are partly offset by increased output from producers outside the Gulf.
The United States, Canada, Brazil, Argentina and Guyana are expected to contribute significantly to the growth, with the five countries projected to increase combined production by 1.6 mb/d this year.
Looking ahead, the IEA forecast that global oil supply would recover by 6.6 mb/d to 108.1 mb/d in 2027.
Gulf producers are expected to account for 5.3 mb/d of the projected increase, while the five major producers in the Americas are forecast to contribute another 1.1 mb/d.
Oil Demand Remains Under Pressure
On the demand side, the agency said global oil consumption continued to face pressure from disruptions to exports of refined petroleum products and liquefied petroleum gas (LPG) from the Gulf, alongside persistently high fuel prices.
Exports of refined products and LPG from the region remain at approximately half of their pre-war levels.
Nevertheless, the pace of the contraction in global oil demand is expected to moderate to 2.7 mb/d year-on-year in the fourth quarter of 2026, compared with declines of 5 mb/d in the second quarter and 3.8 mb/d in the third quarter.
For the full year, global oil demand is projected to fall by an average of 2.7 mb/d.
The IEA expects the shortfall in demand relative to 2025 levels to narrow further before returning to growth around March 2027.
Consequently, global oil demand is projected to increase by 2 mb/d in 2027.
Petrochemical feedstocks, which have been among the products most severely affected by the conflict, are expected to account for almost 80 per cent of the projected demand growth next year.
However, the agency warned that high fuel prices, increasing electrification and improved fuel efficiency in the global vehicle fleet would continue to restrain the recovery in demand for road transportation fuels.
Surplus Expected in 2027 Amid Supply Concerns
The IEA said its November supply and demand assessments indicate that the global oil market would return to surplus in the fourth quarter of 2026, with a more substantial build-up expected in 2027.
Despite the improving supply outlook, the agency cautioned that significant downside risks remained, particularly as attacks on shipping threaten maritime security and could undermine a sustained recovery in global oil flows.
It identified the persistent tightness in refined petroleum product supplies, particularly diesel, as the most pressing concern for the broader oil market and consumers.
According to the report, continued attacks on Russian energy infrastructure are restricting the country’s diesel supplies to international markets, compounding production and export losses from the Middle East.
Meanwhile, refineries in the Atlantic Basin, particularly in the United States, are operating at high rates to benefit from attractive refining margins.
In Asia, improved crude oil availability and fresh Chinese export quotas for refined petroleum products could support increased refinery operations and higher product supplies.
The agency also highlighted the planned accelerated release of emergency diesel stocks by the IEA over the coming months as an important intervention to bridge the supply gap.
It said the emergency stock releases would provide critical support to international markets until global refining operations and petroleum product output recover sufficiently.
The report’s findings point to an improving outlook for crude oil supplies, but persistent disruptions to refined product markets, particularly diesel, and threats to maritime transportation continue to expose the global oil industry to significant uncertainties.
