Overview
The International Energy Agency (IEA) said on Thursday that global oil supply fell sharply in January and that world oil demand is now expected to expand at a slower pace in 2026. The IEA recorded total global oil supply of 106.6 million barrels per day last month, a decline of 1.2 million barrels per day from December.
Drivers of the January decline
The report attributes the drop in supply to a combination of severe winter storms that hit parts of the United States, an outage at Kazakhstan's large Tengiz oilfield and export constraints affecting major producers including Russia and Venezuela. Supply from Russia alone is estimated to have fallen by 350,000 barrels per day, the IEA said, which it links to sanctions pressure from the United States and European Union amid the ongoing fighting in Ukraine.
Venezuelan crude production also declined in January, according to the IEA. The agency noted, however, that Venezuelan output is expected to rebound after Washington authorized a mechanism for U.S. companies and U.S.-based subsidiaries of international firms to export Venezuelan oil.
Outlook for 2026 supply and demand
Looking ahead, the IEA now forecasts oil production in 2026 to rise by 2.4 million barrels per day to reach 108.6 million barrels per day. That projected increase is expected to be split evenly between Organization of the Petroleum Exporting Countries (OPEC) members and non-OPEC producers. The IEA also noted that OPEC and its allies recently agreed to maintain current production quotas through March.
For 2025, global oil supply rose by nearly 3.1 million barrels per day, the report said.
Price movements and geopolitical tensions
The IEA highlighted a tightening supply picture in January, compounded by rising tensions between the United States and Iran, which together propelled benchmark crude prices up by $10 a barrel during the month. Prices eased by a few dollars at the start of the current month on reports of progress toward de-escalation between Washington and Tehran, but they later moved higher after U.S. authorities advised ships to avoid Iranian waters when navigating the Strait of Hormuz.
While officials from Washington and Tehran described some progress in talks held over a recent weekend, the IEA observed that there has not been a conclusive agreement on Iran's nuclear activities. The lack of a definitive deal leaves markets sensitive to a possible disruption of supplies from the Middle East.
Demand revisions and regional contributors
The agency revised its outlook for annual global oil demand growth moderately lower to 850,000 barrels per day, citing the impact of higher crude prices and broader economic uncertainties. The IEA expects China, the world's largest oil importer, to remain the principal contributor to demand growth, although its projected contribution is well below its average expansion over the past decade.
Surplus risk and production trends
Despite the anticipated slowdown in demand growth, the IEA's report suggests a significant global oil supply surplus in 2026. The agency said this surplus trend has largely been in place since OPEC and its allies began increasing output in April 2025 after an extended period of cuts. The IEA also noted that U.S. production has been rising incrementally.
Implications and context
The IEA's findings underline a market struggling with short-term disruptions and longer-term imbalances. Weather-related outages and operational problems compressed supply in January, while geopolitical and policy developments - most notably sanctions dynamics and diplomatic talks affecting Iran and Venezuela - continue to shape flows and price sensitivity.
The combination of a projected supply uptick in 2026, a moderating demand outlook and the prospect of a sizeable surplus will be closely watched by market participants, policymakers and energy-sector firms as they assess production and investment choices for the year ahead.