IEA sees oil surplus in fourth quarter as Gulf exports recover

The global oil market will move into surplus in the fourth quarter of this year, the International Energy Agency (IEA) said on Friday, as Middle East exports recover faster than worldwide demand despite continued attacks on shipping.

Oil supply will average 105 million barrels per day (bpd) in the quarter, the Paris-based agency said in its monthly report. That is 1.7 million bpd higher than forecast demand. The IEA had previously projected a supply deficit for the period.

Emergency reserves and prices

The IEA also gave more detail on the remaining volumes from a record release of oil from members' emergency reserves pledged in March. It said 71 million barrels would be made available by the end of February, including 15 million barrels of diesel to ease market tightness.

The agency said: “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.” Oil prices reversed earlier gains after the report was released at 0900 GMT. Brent crude was last down 0.1% at $95.71 a barrel.

Gulf recovery and OPEC+ output

The report follows signs that Gulf oil producers are recovering exports disrupted since the start of the war in late February. Producers have used workarounds, including so-called dark crossings through the Strait of Hormuz, where tankers switch off tracking signals to evade attacks.

OPEC+ pumped 41.23 million bpd of crude in October, OPEC said on Wednesday. That was an increase of about 2.04 million bpd from September and represented 97% of the pre-war February volume. OPEC+ includes the Organization of the Petroleum Exporting Countries and allies such as Russia.

Other analysts have also forecast a return to excess supply, despite the lack of a resolution to the Iran war and continuing tanker attacks in the Gulf. JPMorgan last week forecast a global surplus of 1.4 million bpd in October.

Demand and 2027 supply

High oil prices have also curbed demand this year, helping tip the balance into surplus. World oil demand is forecast to fall by 2.7 million bpd in 2026 to 102.3 million bpd before rebounding by 2 million bpd in 2027, the IEA said. The forecasts were little changed from its previous estimates.

Beyond rising OPEC+ output, the IEA highlighted increasing supply from producers outside the group. Production from the United States, Canada, Brazil, Argentina and Guyana will rise by 1.6 million bpd this year. In 2027, global supply is projected to increase by 6.6 million bpd to 108.1 million bpd, led by a further recovery in Gulf output.

For Nigeria, the surplus outlook and the fall in Brent matter because oil export earnings and the naira are closely tied to crude prices. Cheaper crude could ease fuel import costs, but it also weakens the revenue base that supports the currency.