The International Energy Agency said on Friday that global oil supplies will exceed demand in the fourth quarter of the year as Middle Eastern exports recover more rapidly than consumption increases, even as attacks on shipping persist.
In its monthly report, the Paris-based agency said oil supply will average 105 million barrels per day in the fourth quarter, which is 1.7 million barrels per day higher than its forecast for demand. This marks a change from an earlier projection that had anticipated a supply shortfall in the final quarter.
The IEA provided further details on the record release of crude pledged by member countries in March, saying 71 million barrels would be made available by the end of February. That total includes 15 million barrels of diesel, a targeted addition intended to ease market tightness in refined products.
"The oil market is showing tentative signs of rebalancing, with global oil supplies surpassing demand for the first time since the outbreak of the war in Iran," the agency said in the report.
Markets responded to the IEA update by unwinding earlier gains. The benchmark Brent crude price was last reported down 0.1% at $95.71 a barrel after the report was released at 0900 GMT.
The agency said the supply improvement follows evidence that Gulf producers are restoring flows that had been disrupted since the start of the war in late February. Some operators have been using measures such as so-called dark crossings through the Strait of Hormuz, where tankers switch off tracking signals as a means to limit exposure to attacks.
Data reported by OPEC showed the OPEC+ group produced 41.23 million barrels per day of crude in October, an increase of about 2.04 million barrels per day from September, representing 97% of the pre-war February volume.
Other analysts have also signalled a move back to excess supply despite the ongoing conflict and tanker attacks in the Gulf. JPMorgan, for example, forecast a global surplus of 1.4 million barrels per day in October.
The IEA added that elevated oil prices this year have discouraged some consumption, contributing to the shift into surplus. Its medium-term demand outlook showed a decline followed by a recovery: world oil demand is forecast to fall by 2.7 million barrels per day in 2026 to 102.3 million barrels per day, before rebounding by 2.0 million barrels per day in 2027, estimates the agency, little changed from previous forecasts.
Supply increases are not limited to OPEC+ members. The IEA flagged rising production from outside the group, noting that output from the United States, Canada, Brazil, Argentina and Guyana will increase by 1.6 million barrels per day this year.
Looking further ahead, the agency projected global supply will climb by 6.6 million barrels per day in 2027 to 108.1 million barrels per day, driven in part by a further recovery in Gulf output.
However, the IEA cautioned that its 2027 supply growth forecast has been trimmed by 1.1 million barrels per day from last month’s report. The agency said the downward revision partly reflects a lower outlook for Iran, whose exports have been constrained by a US blockade that has curbed its oil shipments.
For 2027 the IEA sees a supply surplus of around 3.8 million barrels per day, marginally lower than a 3.94 million barrels per day surplus projected in the previous month.
The report outlines a market dynamic in which recovering Gulf exports, coordinated releases from strategic reserves, and higher non-OPEC+ output together tip the near-term balance into surplus. At the same time, the agency’s updates underscore the uncertainty surrounding Iran’s export capacity and the continued risk to shipping in the Gulf, both factors that could affect future balances.