The International Energy Agency said on Friday that the global oil market is returning to surplus in the fourth quarter of 2026, the first time supplies have exceeded demand since the war in Iran began, after Gulf exports recovered faster than expected. North Sea Dated crude has already dropped about 32%, from a high of $136 a barrel in early October to around $93 when the agency prepared its November Oil Market Report.
What happened
The IEA’s November report, published on 13 November, marks a shift from the tightness that has defined the market for much of this year. Global oil supply rose a further 2.3 million barrels a day in October to 105.4 million barrels a day, after a 3 million barrel-a-day increase in September, lifting output by 5.3 million barrels a day since August.
World oil demand is still expected to fall by 2.7 million barrels a day in 2026, to 102.3 million barrels a day. The agency expects demand to rebound by 2 million barrels a day in 2027, with liquefied petroleum gas, ethane and naphtha accounting for around 80% of that increase as supply chains normalise, while transport fuels see only modest gains.
Observed inventories increased by 52 million barrels in October, the first monthly rise since June. Oil stored on water jumped 86 million barrels to its highest level since January, reflecting the rebound in Gulf crude exports. On-land stocks continued to fall and remain at their lowest since at least 2016. Despite October’s increase, observed global stocks are still 462 million barrels below their level at the start of the war.
Drivers
The recovery has been led by the Gulf. Exports excluding Oman reached 18.4 million barrels a day in October, still 26% below pre-war levels, with crude flows at 15 million barrels a day, or 82% of pre-war volumes. Those shipments prompted the IEA to raise its fourth-quarter global supply estimate by 3.3 million barrels a day.
Producers outside the region have also added barrels. The IEA said the United States, Canada, Brazil, Argentina and Guyana are on track to boost output by 1.6 million barrels a day this year. In 2027, global supply is projected to recover by 6.6 million barrels a day to 108.1 million barrels a day, including 5.3 million barrels a day from the Gulf and a further 1.1 million from those five American producers.
The physical picture remains uneven. European diesel prices fell about 11% from their October highs but were still close to $180 a barrel, 77% above pre-war levels, as attacks on Russian energy infrastructure and weak Middle Eastern product shipments kept the refined market tight. Global refinery runs fell 1.3 million barrels a day in October to 81.3 million barrels a day, and are forecast to rebound to 84.7 million in December. Freight rates for moving crude from the Middle East to Asia held near record levels.
Rystad Energy estimated that Russian refinery runs in the first ten days of November stood at 4.2 million barrels a day, down from 5 million in late October, after Ukraine attacked nine Russian oil refineries since the start of the month, including the Omsk facility. OPEC+ agreed on 1 November to keep production quotas unchanged for December.
What it means for buyers and producers
A headline crude surplus does not yet mean easy product markets. On-land inventories remain historically tight, and much of October’s build sat on the water rather than in consuming-region tanks. Refiners and physical buyers still face elevated diesel costs and expensive Middle East–Asia freight, even as Dated crude has retreated. The rebound in Gulf exports eases earlier tightness but leaves supply exposed to further attacks on tankers and infrastructure, a downside risk the IEA itself flagged.
What to watch
The test now is whether on-land stocks start to rebuild, or whether further builds remain offshore. Gulf export volumes, tanker security and Russian refinery runs will determine whether the surplus shows up in products as well as crude. Dated crude at around $93 remained about $22 a barrel above pre-war levels when the IEA wrote, so the market has eased, not normalised.
Key figures
- October supply: 105.4 million barrels a day, up 2.3 million barrels a day.
- 2026 demand forecast: 102.3 million barrels a day, down 2.7 million barrels a day.
- October inventories: up 52 million barrels; oil on water up 86 million barrels.
- North Sea Dated crude: down about 32%, from $136 a barrel to around $93.
- European diesel: close to $180 a barrel, 77% above pre-war levels.
- 2027 supply forecast: 108.1 million barrels a day, up 6.6 million barrels a day.
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