The International Energy Agency (IEA) has revised upward its global oil demand growth forecast for 2026, citing a stronger economic outlook and lower crude prices. The agency now expects demand to increase by approximately 930,000 barrels per day (bpd), up from an earlier estimate of 860,000 bpd. This adjustment follows demand growth of around 850,000 bpd in the previous year, reflecting improved macroeconomic conditions and price-related support for consumption.
Despite this positive revision, the IEA warns that supply growth continues to outpace demand significantly. The agency has raised its forecast for supply growth to 2.5 million bpd, indicating that production will surpass consumption once again in 2026, leaving the oil market structurally oversupplied.
In December, global oil production declined by roughly 350,000 bpd, but this only slightly reduced the existing supply surplus. Output from OPEC+ members slipped by around 20,000 bpd, as declines in several Middle Eastern producers were partially offset by increased production from Russia. Meanwhile, non-OPEC+ supply dropped by about 250,000 bpd, mainly due to seasonal reductions in biofuel output.
The IEA highlights that the market balance remains fragile. With seasonal refinery maintenance approaching, crude demand is expected to weaken further, raising the risk of a renewed surplus unless producers implement additional supply cuts.
The agency estimates that the global crude and condensate overhang averaged approximately 1.1 million bpd in the past year, contributing to a sharp increase in inventories. Total crude stocks rose by more than 400 million barrels, with a significant portion held at sea. This includes volumes tied to sanctioned producers such as Russia, Iran, and Venezuela.
While geopolitical tensions persist, the IEA states it is premature to determine whether recent developments in Iran and Venezuela will have a meaningful impact on supply. For now, the agency maintains that the market remains well supplied, with downside risks to the surplus prevailing.
Original Source: Eamonn Sheridan of investinglive.com
