Record surplus expected in crude oil market, could send prices crashing, says IEA

The International Energy Agency (IEA) has warned that oil inventories will grow by 2.96 million barrels per day in 2026, faster than the average at the start of the coronavirus pandemic in 2020.

The main reason, IEA analysts point to weaker demand growth and a rapid increase in production, Bloomberg reports.

Oil demand is expected to grow by only 680,000 barrels per day this year (the smallest increase since 2019) amid weak economic growth in China, India and Brazil. In 2026, demand growth is forecast at the same level – about 700,000 barrels per day. At the same time, the IEA predicts that demand growth will stop by the end of the decade.

At the same time, oil supply will increase faster. The Saudi-led OPEC+ oil cartel has accelerated the lifting of production restrictions and will increase quotas by 2.2 million barrels per day by September.

In addition, the forecast for production by countries outside the cartel was increased by 100,000 barrels per day for 2026, as a result of which they will supply an additional 1 million barrels of oil per day to the world market. At the same time, the UAE has already increased production to 3.5 million barrels per day, which is significantly higher than its current quota.

IEA analysts note that the market is currently partially supporting seasonal high demand for fuel. But as of August, Brent crude oil was trading at around $66 per barrel, having fallen by about 12% since the beginning of the year amid fears about the impact of US trade conflicts on the economy.

Overall, the IEA warns that if current market conditions persist, “something will have to change,” otherwise the balance will remain “skewed in surplus,” causing a significant drop in prices.

Tags: prices, crude oil