IEA Forecasts Looming Oil Surplus Amidst Robust Supply Growth and EV Headwinds

By / / Breaking News

Key Takeaways

  • The International Energy Agency (IEA) has boosted its estimates for a record oil surplus in 2026, driven by strong supply growth from both OPEC+ and non-OPEC+ producers.
  • Global oil supply reached a record 106.9 million barrels per day (b/d) in August, while OPEC+ output is projected to increase by only 40,000 b/d from September to October, falling short of its 137,000 b/d quota increase due to capacity limitations within some member countries.
  • Oil stockpiles have seen a sixth consecutive monthly rise in July, with global stocks adding 26.5 million barrels and cumulative growth since January reaching 187 million barrels, signaling a loosening market.
  • Despite rising supply, global oil demand is still projected to grow by 740,000 b/d in 2025, primarily driven by resilient demand in advanced economies.
  • The IEA highlights China's rapid electric vehicle (EV) adoption as a "fierce headwind" to future gasoline use, significantly impacting long-term oil demand forecasts.

The International Energy Agency (IEA) has released its latest oil market outlook, painting a picture of an increasingly well-supplied global market with a significant surplus on the horizon. The agency has notably boosted its estimates for a record oil surplus in 2026, with forecasts suggesting an "untenable" excess of 3 million b/d in 2026.

Global oil supply hit a record high of 106.9 million b/d in August. This robust supply growth is expected to continue, with OPEC+ output projected to rise by 1.3 million b/d in 2025 and 1 million b/d in 2026. Non-OPEC+ producers are also set to contribute significantly, adding 1.4 million b/d in 2025 and approximately 1 million b/d in 2026.

However, the IEA noted that the actual increase in OPEC+ output from September to October is expected to be only 40,000 b/d, considerably less than the 137,000 b/d quota increase. This shortfall is attributed to capacity limits in some member countries, indicating potential constraints on the group's ability to fully meet its announced production targets.

Adding to the signs of a loosening market, global oil stockpiles rose for the sixth consecutive month in July. This increase saw global oil stocks grow by 26.5 million barrels in July, bringing the cumulative growth since January to 187 million barrels. China's crude stocks alone increased by 106 million barrels between February and August, helping to absorb some of the global supply surplus.

Despite the expanding supply, global oil demand is still forecast to grow by 740,000 b/d in 2025, reaching 103.87 million b/d. This upward revision in demand growth is primarily due to resilient oil demand in OECD countries amidst an uncertain macroeconomic climate, with strong data observed in the US, Germany, Italy, and South Korea. The IEA maintains its demand growth forecast for 2026 at 700,000 b/d, bringing total consumption to 104.57 million b/d.

A significant factor influencing long-term oil demand is China's rapid adoption of electric vehicles. The IEA identifies this trend as a "fierce headwind" to gasoline use, with China continuing to lead in EV sales, manufacturing, and battery production. This shift is expected to displace more than 5 million barrels of oil per day globally by 2030, with China accounting for half of these savings.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We are not financial professionals. The authors and/or site operators may hold positions in the companies or assets mentioned. Always do your own research before making financial decisions.
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