IEA Sees 1.7 Million BPD Oil Surplus in Fourth Quarter

The International Energy Agency expects a global oil surplus of 1.7 million barrels a day in the fourth quarter, with supply averaging 105 million bpd. That reverses the deficit the agency had projected for the same period. Recovering exports have loosened a market that looked tight.

Supply climbed 2.3 million bpd to 105.4 million bpd in October, after a 3 million bpd increase in September. The gain came despite continued attacks on energy infrastructure and shipping in the Middle East. Gulf shipments, the agency said, are recovering faster than demand.

Gulf exports excluding Oman reached 18.4 million bpd in October, or 74% of pre-war levels. Crude shipments from the region hit 15 million bpd, 82% of pre-war volumes.

Prices showed the shift. North Sea Dated crude fell 32% from an October peak of $136 a barrel to about $93 at the time of the report.

Supply outlook trimmed for 2026

The agency expects global supply to fall by 4.8 million bpd on average in 2026, then rebound 6.6 million bpd to 108.1 million bpd in 2027. Its 2026 figure was cut by 1.1 million bpd from the previous report, partly because of constraints on Iranian shipments.

Producers outside the Gulf are adding barrels as well. Output from the US, Canada, Brazil, Argentina and Guyana is expected to rise 1.6 million bpd in 2026 and another 1.1 million bpd in 2027.

Demand is forecast to fall 2.7 million bpd to 102.3 million bpd in 2026, then grow 2 million bpd in 2027. LPG, ethane and naphtha drive most of the recovery. Transport fuels stay subdued, held down by high prices, electrification and better vehicle efficiency.

Crude rebounded on Friday. Brent gained 1.26% to $97.03 a barrel at 6:03 pm AST, and WTI added 0.94% to $89.57. Vijay Valecha, chief investment officer at Century Financial, tied part of the move to Donald Trump saying Washington did not need a deal with Iran, and to renewed attacks on Saudi energy infrastructure. Hopes for a peace agreement had earlier pushed prices to a two-month low, he said. Valecha still sees the near-term outlook tilted to the downside as Middle East inventories recover, with further regional escalation the main risk.

Global observed inventories rose 52 million barrels in October, the first increase since June, even as on-land stocks kept declining. OECD inventories fell 47 million barrels. The agency said 71 million barrels of members' emergency stock release would be available by the end of February, including 15 million barrels of diesel aimed at persistent shortages.

That leaves the market with a thinner cushion than the surplus headline suggests. Roughly a quarter of Gulf exports and nearly a fifth of the region's crude are still offline, and the barrels being drawn to cover shortages are coming from emergency reserves rather than commercial storage. A fresh disruption would land on a system already spending its backstop.