LONDON, Jan 21 – The International Energy Agency (IEA) has announced that the global oil market is expected to have a significant surplus in the first quarter of 2026. This surplus is attributed to the fact that excess oil supplies have managed to balance out geopolitical risks.
According to the IEA's monthly oil report, global oil supply is predicted to outpace demand by 4.25 million barrels per day in the first quarter. This surplus represents roughly 4% of total world demand and is greater than earlier estimates.
Since the beginning of the year, oil prices have climbed about 6% due to rising concerns about geopolitical tensions and potential disruptions in the oil market. By 1142 GMT on Wednesday, the global benchmark Brent crude was priced at $65.02, which was an increase of 10 cents for the day.
Earlier this month, the United States targeted Venezuelan President Nicolas Maduro and urged oil companies to invest in Venezuela to increase production. However, short-term supplies from Venezuela have faced interruptions.
Potential U.S. military actions against Iran have also raised worries about reduced supplies, while drone strikes and technical difficulties have impacted oil production in Kazakhstan.
The IEA stated, “Unless there are significant disruptions to supplies from Iran, Venezuela, or additional cuts from other producers, we are likely to see a notable surplus in the first quarter of 2026.” They added that the current excess supply provides some reassurance to market players and has helped stabilize prices.
OPEC+ HALTS AFTER A SERIES OF SUPPLY INCREASES
Supply has increased more rapidly than demand primarily because OPEC+, which includes the Organization of the Petroleum Exporting Countries along with Russia and other allies, began raising output in April 2025 following prolonged cuts. Other oil-producing nations like the U.S., Guyana, and Brazil have also ramped up production.
However, OPEC+ has decided to pause its supply increases for the first quarter of 2026.
For the entire year, the market is expected to experience an implied surplus of 3.69 million barrels per day, a slight adjustment down from last month’s estimate of 3.84 million barrels per day.
The IEA also revised its demand growth forecast upwards by 70,000 barrels per day to 930,000 barrels per day, attributing this change to improved economic conditions after last year’s tariff disputes and lower oil prices compared to the previous year.
While it's still early to fully understand the impact of recent geopolitical changes on the oil market, the IEA noted that U.S. restrictions on Venezuelan oil shipments have decreased exports by 580,000 barrels per day from December to early January.
REFINERY MAINTENANCE SEASON CONTRIBUTES TO SURPLUS
The surplus is particularly anticipated in the first quarter due to planned maintenance shutdowns by global oil refiners, which typically leads to lower demand.
The IEA commented, “As seasonal refinery maintenance is about to begin, demand for crude will decrease, requiring further cuts in crude production.”
In contrast, OPEC predicts a quicker growth in demand than the IEA, forecasting an increase in oil usage by 1.38 million barrels per day this year. According to OPEC’s data, supply and demand are nearly balanced for 2026, based on a Reuters calculation, rather than indicating a surplus.
On the supply side, the IEA has raised its global growth forecast for this year to 2.5 million barrels per day, up from around 2.4 million barrels per day in December, with approximately 52% of this growth coming from outside OPEC+.