Global crude oil market shifts to surplus as Persian Gulf supplies recover

The global crude oil market moved into surplus this autumn for the first time since the outbreak of the war between the US and Iran. However, analysts warn that rebuilding depleted inventories will take months, the Financial Times reports.

In October, crude oil supply exceeded consumption by almost 2 mln barrels per day. The International Energy Agency had previously reported a slight deficit in September but subsequently revised its estimate, with the market now showing a surplus of 600 thsd barrels per day instead.

The shift was made possible by a sharp increase in supplies from Persian Gulf countries, despite intensified Iranian attacks on shipping. Meanwhile, producers in other regions increased output, while consuming countries reduced their crude oil use.

The surplus is forecast to persist in the fourth quarter of this year and throughout next year.

This shift has eased pressure on global crude oil inventories, which had been declining for several months due to supply disruptions from the Middle East, one of the world’s largest oil-producing regions. According to the IEA, observed crude oil inventories increased by an average of 1.7 mln barrels per day in October. This was the first increase since June. Over the previous three months, inventories had declined by 1.9 mln barrels per day.

However, analysts caution that the return to a surplus does not mean consumers will no longer feel the effects of what the IEA previously described as the “largest supply disruption in history”.

The improvement has also been partly driven by weaker demand. The IEA forecasts that crude oil consumption will decline by 2.7 mln barrels per day in 2026 before rising by 2 mln barrels per day next year.

Most of the additional oil entering the global market is crude oil. It provides feedstock for refineries but cannot quickly resolve shortages of refined products due to insufficient processing capacity.

The physical price benchmark for Brent crude oil stands at around $95 per barrel, compared with a peak of $136 in early October. Meanwhile, prices for certain crude oil products, particularly jet fuel and diesel, remain consistently high.

Analysts also estimate that it will take many months of surplus supply to replenish global inventories. This is particularly true for refined product stocks, which have declined much more sharply than crude  oil inventories.

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