'Market balance looks bloated': IEA predicts record oil surplus

According to the IEA, in 2026, the oil market will face a record oversupply - inventories will grow by almost 3 million barrels per day, which will exceed even the indicators of the pandemic year 2020. The main contribution to supply growth is the accelerated recovery of OPEC+ production, while demand in China, India and Brazil was below expectations. Analysts predict that with such an imbalance, Brent oil prices could fall below $60 per barrel by the end of the year.

The global oil market could face a record supply glut next year due to weak demand growth and strong production increases, according to a monthly report by the International Energy Agency.

Oil inventories in 2026 will accumulate at a rate of 2.96 million barrels per day, exceeding even the average accumulation rate in pandemic 2020, Bloomberg notes. This is influenced by the acceleration of production recovery by OPEC+ countries. In early August, Saudi Arabia approved another increase for September, deciding to return 2.2 million bpd to the market. In addition, the IEA raised its forecast for non-OPEC+ supply growth in 2026 by 100,000 bpd to 1 million bpd, mainly driven by the U.S., Guyana, Canada and Brazil.

Meanwhile, growth in global oil demand this year and next is less than half the pace seen in 2023, the agency said.

"The balance in the oil market looks increasingly bloated as projected supply by the end of the year and into 2026 far exceeds demand. Clearly, something has to change for the market to rebalance," the IEA said.

During trading on August 13, futures for Brent crude oil were down almost 1% at the moment, down to $65.6 per barrel. Futures for US West Texas Intermediate (WTI) crude were also down 1%, below $62.6.

Oil prices are down about 13% this year as rising supply from both OPEC+ and its rivals coincided with growing fears that U.S. President Donald Trump's trade war will impact economic growth, Bloomberg writes.

The price drop provides some respite for consumers after years of accelerating inflation and is a victory for Trump, who is pushing for lower fuel costs but also poses financial risks for oil producers and countries, the agency said.

The oil market is currently receiving some support from strong summer demand for transportation fuel, but IEA data indicates that it is already starting to move into oversupply. Global oil inventories reached a 46-month high in June. New sanctions against Russia or Iran could still change the situation, the agency added in its report.

Global oil consumption will grow by just 680,000 bpd this year - the weakest since 2019 - amid disappointing demand in China, India and Brazil. Growth will be 700,000 bpd in 2026, according to the IEA report.

The agency predicts that global oil consumption will stop rising by the end of this decade as countries shift from fossil-fueled transportation to electric vehicles.

It remains unclear whether the OPEC+ alliance will continue to fight for market share, Bloomberg wondered. In early August, the group made it clear that its next move was not fully determined and could mean both further production increases and a pause or even a reversal of recent production increases.

The U.S. Energy Information Administration (EIA) predicted in its Short-Term Energy Outlook (STEO) on August 12 that the average price of Brent crude oil will average less than $60 per barrel in the fourth quarter, CNBC writes. This would be the first quarter with such low average prices since 2020. The EIA also noted that the growth in global oil supply will exceed the growth in demand for petroleum products.

In addition, UBS earlier this week lowered its year-end Brent crude oil price forecast from $68 to $62 a barrel, citing rising supply from South America and steady production from countries under sanctions.

The bank added that demand in India has recently been below its expectations, and expressed the view that OPEC+ will pause production increases unless there are more significant unexpected supply disruptions.

This article was AI-translated and verified by a human editor