The global oil market is heading towards a supply surplus in the final quarter of 2026 as crude exports from the Gulf region recover faster than demand, the International Energy Agency has said.
The agency disclosed this in its November Oil Market Report released on Friday, warning that the improving supply outlook could significantly reshape global energy markets following months of disruptions caused by the war in Iran.
According to the IEA, global oil supply is expected to average approximately 105 million barrels per day in the fourth quarter of 2026, exceeding projected demand by about 1.7 million barrels per day.
The development represents a major shift from earlier expectations of continued supply shortages following the conflict, which severely disrupted crude production and shipments from the Middle East.
The agency said global oil supply increased by 2.3 million barrels per day in October to reach 105.4 million barrels per day, following a three-million-barrel daily increase recorded in September.
It attributed the improvement largely to stronger exports from Gulf producers, particularly Saudi Arabia and Iraq, despite continuing attacks on energy infrastructure and commercial vessels.
Oil exports from Gulf countries, excluding Oman, climbed to 18.4 million barrels per day in October, representing approximately 74 per cent of pre-war levels.
Crude shipments alone recovered to 15 million barrels per day, equivalent to 82 per cent of volumes recorded before the conflict.
The IEA said the recovery had prompted it to raise its estimate for global oil supply in the fourth quarter by 3.3 million barrels per day.
However, the agency warned that the recovery remained vulnerable to renewed attacks on tankers and energy infrastructure, particularly around strategic shipping routes in the Middle East.
The Strait of Hormuz, through which a significant proportion of the world’s petroleum supplies normally passes, remains a major concern for international energy markets.
On the demand side, the IEA projected that global oil consumption would decline by 2.7 million barrels per day in 2026 to approximately 102.3 million barrels per day.
It attributed the weakness to elevated energy prices, supply disruptions and changing consumption patterns, including improved fuel efficiency and the increasing adoption of electric vehicles.
The agency, however, expects demand to rebound by approximately two million barrels per day in 2027 as supply chains gradually normalise.
Meanwhile, global oil production is projected to increase by 6.6 million barrels per day next year, reaching an average of 108.1 million barrels per day.
The anticipated expansion could result in a substantially larger market surplus in 2027.
Despite the improving crude supply outlook, the IEA cautioned that shortages of refined petroleum products, particularly diesel, remain a major concern.
It noted that disruptions to Russian energy infrastructure and reduced exports from the Middle East had continued to constrain international diesel supplies.
The agency also disclosed that 71 million barrels from emergency oil stock releases by member countries would become available by the end of February, including 15 million barrels of diesel.
The latest projections have important implications for oil-producing countries, including Nigeria, as a sustained increase in global supply could exert downward pressure on international crude prices and potentially affect government revenues.
For consumers, however, the extent to which additional supplies translate into lower fuel prices will depend on refining capacity, transportation costs, geopolitical developments and domestic market conditions. The IEA maintained that although the market was showing signs of rebalancing, the security of international shipping routes remained critical to sustaining the recovery.
