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Summary
- Global demand growth revised 70,000 bpd higher on lower tariff impacts in 2026
- Oil prices have risen about 6% so far this year
- OPEC+ has paused output hikes
(Reuters) – The global oil market will be in deep surplus in the first quarter of 2026, the International Energy Agency said on Wednesday, as so far excess supplies have offset the geopolitical risk of disruption.
The IEA, which advises industrialised countries, in its monthly oil report projected global oil supply would exceed demand by 4.25 million barrels per day in the first quarter. A surplus of that size would be about 4% of world demand and is larger than other predictions.
Oil prices have risen about 6% since the start of the year, as concerns about geopolitics and possible oil market disruption drove buying. Global benchmark Brent was trading at $65.02 at 1142 GMT on Wednesday, up 10 cents on the day.
The U.S. captured Venezuelan President Nicolas Maduro at the start of the month and called on oil companies to invest in Venezuela to boost production, but in the short-term supplies from the country have been disrupted.
Threats of possible U.S. strikes on Iran have also raised the prospect of reduced supplies, and drone attacks and technical issues have reduced output in Kazakhstan.
“Barring any significant disruptions to supplies in Iran, Venezuela, or further cuts from other producers, a significant surplus is likely to re-emerge in the first quarter of 2026,” the IEA said.
“For now, bloated balances provide some comfort to market participants and have kept prices in check.”
OPEC+ HAS PAUSED AFTER SERIES OF SUPPLY HIKES
Supply has risen faster than demand mostly because OPEC+, or the Organization of the Petroleum Exporting Countries plus Russia and other allies, began boosting output in April 2025 after years of cuts. Other producers, such as the U.S., Guyana, and Brazil, have also increased production.
OPEC+ has, however, paused its output hikes for the first quarter of 2026.
For the whole year, the market faces an implied surplus of 3.69 million bpd, the IEA’s latest figures on Wednesday indicated, a downward revision from 3.84 million bpd in last month’s report.
Helping to erode the surplus forecast, the IEA revised up its prediction for world oil demand growth by 70,000 bpd to 930,000 bpd, citing what it called a normalisation of economic conditions after last year’s tariff turmoil, and lower oil prices than a year ago.
The IEA said it is too early to assess the full implications of all the latest geopolitical developments on the oil market, but said the U.S. blockade on Venezuelan oil shipments had lowered exports by 580,000 bpd from December to early January.
REFINERY MAINTENANCE SEASON ADDS TO SURPLUS
The surplus will build up in the first quarter in particular as that is when global oil refiners carry out planned shutdowns and demand is lower.
“With seasonal refinery maintenance about to commence, reducing demand for crude, further reductions in crude production will be needed,” the Paris-based IEA said.
Rival forecaster OPEC expects faster demand growth than the IEA, predicting oil use will rise by 1.38 million bpd this year. OPEC’s data indicate a near balance between supply and demand in 2026, according to a Reuters calculation, rather than a surplus.
On supply, the IEA revised its global growth forecast for this year higher, to 2.5 million bpd from around 2.4 million bpd in December, saying around 52% of the growth will come from outside OPEC+.
Reporting by Robert Harvey in London; Editing by Alex Lawler, Bernadette Baum and Barbara Lewis
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