Global oil supply returns to surplus; IEA to speed stock releases

By Grace Kim

Global oil supplies outstripped demand by almost 2 million barrels a day in October, the International Energy Agency (IEA) said. That marked the first surplus since the US-Israeli war against Iran began.

The Paris-based agency said the market was “showing tentative signs of rebalancing, with global oil supplies surpassing demand for the first time since the outbreak of the war in Iran.” The agency attributed the shift to one factor: “Gulf exports recovered much faster than global oil demand.”

How did supply recover so quickly?

Opec+ oil cartel said it pumped 41 million barrels a day of crude in October, up from about 2 million in September and at 97% of its prewar volumes. The IEA said the Middle East conflict had blocked shipments through the Strait of Hormuz, producing months of disruption.

The IEA expects global oil supply to average 105 million barrels a day in the final three months of the year, 1.7 million barrels above forecast demand. The agency had previously expected a fourth-quarter deficit.

The IEA’s fourth-quarter balance has flipped from deficit to surplus because supply returned faster than consumption.

What does the demand slowdown mean?

The IEA expects global oil demand to fall 2.68 million barrels a day this year to 103.2 million barrels a day. Consumption should rebound next year but remain below 2025 levels.

Growth will come mostly from petrochemical feed stocks, the IEA said, as the market for vehicle fuel is hit by “high prices, electrification and fuel efficiency.”

The lower demand forecast leaves more of the balancing burden on restored supply, even as consumption starts to recover next year. It also explains why a fourth-quarter surplus can emerge while Brent remains above its pre-conflict level.

How did the Hormuz disruption move Brent?

The IEA’s market review highlighted the Strait of Hormuz’s global role. The waterway normally carries one-fifth of the world’s oil and gas supply.

Brent crude, the international benchmark for oil prices, traded at about $72 a barrel in February before the conflict began. It hit $126 a barrel by the end of April as the conflict triggered a rise in energy prices this year.

This week, Brent fell to $89.66, its lowest level since late August, after US president Donald Trump told reporters the war with Iran was “effectively over.” Brent traded at about $95 a barrel on Friday.

Brent’s decline from April’s peak tracks the return of supply and the fading of conflict-related disruption. Friday’s $95 still sat above February’s pre-conflict $72.

Can tanker attacks disrupt the surplus?

Concerns remain about continued attacks on oil tankers in the Middle East, the report said. It also cited reports that senior Iranian officials believe the US could be planning further military strikes.

Those risks sit alongside an expected fourth-quarter supply surplus of 1.7 million barrels a day and Brent near $95 a barrel. A renewed shipping disruption or military escalation could interrupt the recovery in Gulf exports and tighten supply again.

The projected surplus depends on tankers continuing to move and Gulf exports holding their recovered pace.

How much emergency oil is ready for release?

The recovery in global supply has eased pressure on emergency oil stockpiles that the Iran conflict had diminished, the IEA said. Its members will speed up the release of remaining emergency oil stocks pledged earlier this year.

The additional release will add 71 million barrels to the market by the end of February. Those stocks sit in refineries, oil terminals, power stations and at offshore fields in the North Sea.

The accelerated release adds near-term supply while leaving production exposed to tanker attacks and possible further US strikes.

For the final quarter, the IEA’s 105 million barrel-a-day supply forecast leaves a 1.7 million barrel-a-day cushion over demand. The test is whether tanker security holds, Gulf exports sustain their recovery and the additional 71 million barrels reach the market by the end of February.