The International Energy Agency (IEA) cut its forecast for next year’s global oil surplus for the first time since May, citing stronger demand expectations and weaker supply from nations facing sanctions.
The agency’s December Oil Market Report, released on Thursday, now projects a 3.84 million-barrel-per-day (bpd) glut in 2026, down from the 4.09 million bpd surplus estimated in November.
Oil Markets Snapshot: Oil prices were up on Friday. Brent crude futures rose 46 cents to $61.75 a barrel by 3.55 AM ET, while U.S. West Texas Intermediate (WTI) crude was at $58.09 a barrel, up 49 cents. But both benchmarks were still on track for a weekly loss of about 3%.
The Energy Select Sector SPDR Fund (NYSE:XLE), which includes U.S. oil majors ExxonMobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX), ticked up 0.48% in Friday premarket trading, while the United States Oil Fund (NYSE:USO), which tracks near-month WTI futures, gained 0.45%.
Demand Outlook Improves On Stronger Economy, Easing Tariff Fears
The IEA raised its global oil demand growth forecasts for both 2025 and 2026, pointing to improving macroeconomic conditions and receding anxiety over tariffs. The agency expects world oil demand to rise by 860,000 bpd in 2026, 90,000 bpd higher than last month's projection. For 2025, it increased the growth estimate by 40,000 bpd to 830,000 bpd.
According to the report, falling oil prices and a weaker U.S. dollar — both near four-year lows — are likely to further support consumption. Nearly all demand growth in 2025 is expected to come from non-OECD economies, where consumption patterns are more closely tied to broader economic momentum.
The agency noted that recent breakthroughs in U.S. trade agreements helped stabilize global sentiment after tariff-related uncertainty weighed earlier in the year.
Supply Expectations Cut As Sanctions Hit Russia, Venezuela
On the supply side, the IEA trimmed its growth forecasts for 2025–2026 due to tightened sanctions on Russia and Venezuela, which have constrained exports. The agency now expects global supply to rise by 2.4 million bpd next year, down from the 2.5 million bpd it projected previously.
Supply from the Organization of the Petroleum Exporting Countries (OPEC) plus key allies, or OPEC+, is expected to be lower than earlier estimates, reflecting disruptions in sanctioned countries and the group's decision to pause output increases during the first quarter of 2026. Global supply dropped by 610,000 bpd in November, driven by declines in Russia and Venezuela.
Russian export revenues fell to their lowest level since the 2022 invasion of Ukraine, the IEA said.
Non-OPEC+ Producers Still Anchoring Growth
The IEA held its non-OPEC+ supply outlook steady for both 2025 and 2026 as producers in the Americas — including the U.S., Canada, Brazil, Guyana, and Argentina — continue to ramp up output.
The agency reiterated that the current "parallel markets" trend, in which crude supplies remain abundant while refined fuel markets stay tight, will likely persist. Limited spare refining capacity outside China and ongoing EU sanctions on Russian fuel are expected to keep pressure on product markets.
It’s also worth noting that data published by OPEC on Thursday points to a broadly balanced global oil market in 2026, projecting that supply and demand will align closely — a stance that contrasts sharply with the forecast of the IEA and others who predict a massive glut.
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