IEA forecasts global oil glut in 2026 on strong production growth, weak demand

(The Center Square) – Surplus supplies of crude oil in global markets will reach about 4 million barrels per day in 2026 as both OPEC+ and other producers increase output while demand growth remains sluggish in most countries, the International Energy Agency (IEA) predicted Tuesday in its most recent monthly report.World oil production will rise by 3 million barrels per day in 2025 to 106.1 million barrels per day and grow by another 2.4 million barrels a day in 2026 to an average of 108.5 barrels a day, according to the IEA’s latest forecast. The IEA projects additions to global oil supplies will outpace the growth in demand by about 3.3 million barrels per day in 2026.Global oil demand will rise only about 710,000 bpd in 2026 due to a more challenging economic backdrop, said the IEA. “This is well below historical trend, as a harsher macro climate and transport electrification make for a sharp deceleration in oil consumption growth,” the agency said.The IEA projects the Organization of Petroleum Exporting Countries along with major exporters Russia, Mexico, Malaysia and five other countries, called OPEC+, will collectively increase oil output by 1.4 million barrels per day in 2025 and another 1.2 million in 2026, based on the current production agreement.Non-OPEC+ oil producing countries led by the United States, Brazil, Canada, Guyana and Argentina are expected to produce an additional 1.6 million barrels per day in 2025 and another 1.2 million barrels per day 2026, accounting for about 52% of the projected growth in global output during the period.The oil market has been in surplus since the start of the year, but inventory builds were concentrated primarily in stockpiles of crude oil in China and natural gas liquids in the United States, according to the IEA.Oil market dynamics changed in September, however, when a surge in Middle East oil production boosted the region’s exports to two-and-a-half-year highs. “This, combined with robust flows from the Americas, swelled oil on water in September by a massive 102 million barrels, equivalent to 3.4 million barrels a day, the largest increase since the Covid-19 pandemic,” according to the IEA.The global supply of crude oil in September was up by a massive 5.6 million barrels a day compared with a year ago, the agency said, with OPEC+ accounting for 3.1 million barrels of the increase. OPEC+’s “Group of 8” consisting of Saudi Arabia, the UAE, Kuwait, Russia, and other countries reversed 2 million barrels a day of production cuts in September while Libya, Venezuela and Nigeria also increased output, according to the IEA.Despite sluggish growth in global oil demand, projected at about 700,000 barrels per day in both 2025 and 2026, the IEA expects the petrochemical sector will “reassume its position in the driving seat of oil demand growth” as stagnant economies, increasing vehicle efficiencies, and strong global electric vehicle sales “make for strong headwinds for petroleum-based road transport fuels.”The Paris-based IEA is an intergovernmental organization established in 1974 to advise governments on energy policy and to coordinate a collective response to major disruptions in oil supplies. Representing 32 member countries, the agency has a two-fold mandate to promote energy security and to guide the transition to cleaner energy.In comparison, OPEC predicts oil demand will grow about 1.2 million barrels per day in 2026, which is about 500,000 barrels per day more than the figure projected by the IEA. For 2026, OPEC forecasts a near balance in the global oil market, implying a small surplus or even a slight deficit.Benchmark Brent crude oil futures settled Tuesday at $62.39 per barrel, down 79 cents, or 1.3% on the day.