IEA forecasts oil supply growth exceeding demand in 2026 despite geopolitical tensions.
Crude oil supply will outpace the optimistic projection for demand growth, the International Energy Agency (IEA) said in its latest monthly oil market report (OMR) released on Wednesday.
How Demand-Supply Dynamics Are Shaping Up? Citing the normalization of economic conditions following the tariff turmoil witnessed in 2025 and the lower prevailing oil prices, the IEA raised its global oil demand forecast for 2025 to 930 kilobarrels per day (kb/day) from 850 kb/day projected last month. The Paris-based intergovernmental organization sees a recovery in petrochemical feedstocks partially offsetting the ongoing slowdown in gasoline gains.
The IEA, however, expects excess supply to absorb the increased demand. Following the unwinding of the OPEC+ production cuts, Saudi Arabia has led the member countries in output growth. Meanwhile, the U.S., Canada, Guyana and Argentina have dominated the non-OPEC+ supply growth.
“Barring any significant sustained disruptions to output – and if OPEC+ stays the course with its current production policy and activity in the US shale patch avoids major downshifts – global oil supplies could increase by a further 2.5 mb/d in 2026,” the IEA said.
“Combined with the hefty surplus that has built up in storage tanks and at sea over the past year, this would leave the market with a significant buffer well in excess of demand.”
Non-OPEC+ countries will account for 1.3 mb/d of the supply gains forecast for 2026.
What December Numbers Show? According to IEA data, global oil supply fell by 350 kb/d month over month (MoM) to 107.4 mb/d. Global refinery crude throughputs surged by 2 mb/day to 85.7 mb/day in December, ahead of the first-quarter seasonal maintenance in the U.S., Europe, the Middle East and Asia.
The agency noted a slump in refining margins over the course of December, mainly due to weak profitability in Europe.
While the geopolitical tensions surrounding Venezuela and Iran pressured oil exports from these countries, Russia made up for the shortfall, with increased domestic refinery operations and exports in December.
How Crude Oil Futures Are Reacting? The most-actively traded West Texas Intermediate (WTI) crude oil futures contract for March delivery was marginally higher (up 0.10% at $60.42 a barrel) early Wednesday even as some of the other energy commodity futures such as natural gas and heating oil advanced sharply.
After losing about 20% in 2025, oil futures have gained about 5.1% so far this year, with geopolitical tensions offering support.
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U.S. President Donald Trump’s fixation on annexing Greenland has emerged as the next big geopolitical threat as the U.S. and European nations signal intention to take on each other through a raft of aggressive tariffs and sanctions.
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