IEA Sees a 1.7m Barrel Oil Surplus as Gulf Exports Return

Global oil supply will exceed demand by about 1.7 million barrels a day in the fourth quarter of 2026, the International Energy Agency said in its monthly Oil Market Report on 13 November, the first surplus it has recorded since the war with Iran began. The agency put fourth-quarter supply at around 105 million barrels a day and raised that estimate by 3.3 million barrels a day against the forecast it published on 14 October, which had the quarter in deficit.

The swing came from the Gulf. Global production rose by 2.3 million barrels a day in October to 105.4 million, following a 3 million-barrel increase in September, the agency said. That recovery has arrived faster than consumption, which is the whole of the story: the IEA has not raised its demand forecast, it has simply stopped assuming the barrels would stay missing.

A year of losses that is still a year of losses

For 2026 as a whole, the picture remains grim. The IEA expects supply to fall by 4.8 million barrels a day to average 101.6 million, before rebounding 6.6 million to 108.1 million in 2027, with a 5.3 million increase coming from Gulf production. Supply losses from the Mideast Gulf and Russia were partially offset this year by growth in the Americas, where the United States, Canada, Brazil, Argentina and Guyana are on track to add a combined 1.6 million barrels a day, according to the report as reported by Argus on 13 November.

Demand is forecast to fall by 2.7 million barrels a day in 2026 to 102.3 million, then recover by 2 million to 104.3 million in 2027. The year-on-year contraction narrows to 2.7 million barrels a day in the fourth quarter from an average 4.4 million across the second and third quarters. Petrochemical feedstocks such as LPG, ethane and naphtha account for roughly 80 per cent of next year's gain.

Crude is cheap again, diesel is not

Brent was trading near $95.71 a barrel, down 0.1 per cent, after the report was published at 09:00 GMT, heading for a second consecutive weekly decline of about $2. West Texas Intermediate was around $88 a barrel. A crude price falling while an annual supply deficit of nearly 5 million barrels a day persists is not a contradiction; it is what happens when the market stops paying for insurance against the next disruption.

Middle distillates are the exception, and they are the part that reaches households. The IEA's October report recorded wholesale diesel above $200 a barrel in Singapore in mid-September and all-time highs near $220 in Europe and the United States, with total OECD gasoil stocks drawing counter-seasonally to 565 million barrels in July, 5 per cent below pre-conflict levels and the lowest since November 2023. The November report says diesel remains tight, with attacks on Russian energy infrastructure continuing to weigh on supply. Crude benchmarks are the headline number; diesel cracks are the one that decides whether freight and heating costs come down.

The 3.4 million barrel disagreement

Two days before the IEA published, OPEC kept its own demand forecasts unchanged in its Monthly Oil Market Report of 11 November, projecting global demand growth of 180,000 barrels a day to 105.72 million in 2026 and 2.55 million to 108.28 million in 2027. Set those against the IEA's 102.3 million and 104.3 million and the two institutions are describing different worlds.

A 3.4 million barrel a day gap on 2026 demand is larger than global demand growth in a normal year, and it is not a rounding difference in methodology. The IEA counts the lost Gulf product and LPG exports as demand destroyed; OPEC's framing keeps more of it as demand deferred. The honest judgment is that the next two quarters will settle which reading was right, because a genuine surplus shows up in inventories rather than in forecasts. FGE, reading the same report on 13 November, said the agency had confirmed an OECD stock draw in October alongside the supply surplus, which is not what a comfortable market looks like.

The IEA cautioned that continued attacks on shipping remain a significant downside risk to the supply outlook, which is the sentence that undercuts the headline. What is not public is the report's own detail: the OMR is a subscription product, and the figures above come from the agency's release as carried by the Wall Street Journal, Argus and the Oil & Gas Journal rather than from a public document. OPEC publishes next on its usual mid-month schedule, and the IEA's December report is due on 11 December.