World oil market faces major surplus in first quarter: IEA

[LONDON] The global oil market will be in deep surplus in the first quarter of 2026, the International Energy Agency (IEA) said on Wednesday (Jan 21), as so far excess supplies have offset the geopolitical risk of disruption.

In its monthly oil report, the IEA, which advises industrialised countries, projected that the global oil supply would exceed demand by 4.3 million barrels a day in the first quarter.

A surplus of that size would be about 4 per cent of the world demand, and is larger than other predictions.

Oil prices have risen about 6 per cent since the start of the year, as concerns about geopolitics and possible oil market disruption drove buying. The global benchmark Brent was trading at US$65.02 as at 11.42 am in London on Wednesday, up 10 cents on the day.

The US captured Venezuelan President Nicolas Maduro at the start of the month and called on oil companies to invest in Venezuela to boost production, but in the short-term, supplies from the country have been disrupted.

The threats of possible US strikes on Iran have also raised the prospect of reduced supplies, and drone attacks and technical issues have reduced output in Kazakhstan.

“Barring any significant disruptions to supplies in Iran, Venezuela or further cuts from other producers, a significant surplus is likely to re-emerge in the first quarter of 2026,” the IEA said.

It added: “For now, bloated balances provide some comfort to market participants and have kept prices in check.”

Opec+ has paused after series of supply hikes

Supply has risen faster than demand mostly because Opec+, the Organization of the Petroleum Exporting Countries plus Russia and other allies, began boosting its output in April 2025 after years of cuts. Other producers, such as the US, Guyana and Brazil, have also increased production.

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However, Opec+ has paused its output hikes for the first quarter of 2026.

For the whole year, the market faces an implied surplus of 3.7 million barrels a day, the IEA’s latest figures on Wednesday indicated, a downward revision from 3.8 million barrels a day in December’s report.

Helping to erode the surplus forecast, the IEA revised up its prediction for world oil demand growth by 70,000 at 930,000 barrels a day, citing what it called a normalisation of economic conditions after last year’s tariff turmoil, and lower oil prices than a year before.

The IEA said that it is too early to assess the full implications of all the latest geopolitical developments on the oil market, but said that the US blockade on Venezuelan oil shipments had lowered exports by 580,000 barrels a day, from December to early January.

Refinery maintenance season adds to surplus

The surplus will build up in the first quarter in particular, as that is when global oil refiners carry out planned shutdowns and the demand is lower.

“With seasonal refinery maintenance about to commence, (thus) reducing demand for crude, further reductions in crude production will be needed,” the Paris-based IEA said.

Rival forecaster Opec expects faster demand growth than the IEA, predicting that oil use will rise by 1.4 million barrels a day in 2026. Opec’s data indicates a near balance between supply and demand in 2026, rather than a surplus, based on a Reuters calculation.

On supply, the IEA revised its global growth forecast for this year higher, to 2.5 million barrels a day from around 2.4 million barrels a day in December, saying that around 52 per cent of the growth will come from outside Opec+. REUTERS