(Nov 13): Global oil markets will swing to a supply surplus for the first time since the start of the Iran war as Persian Gulf exports recover despite the ongoing conflict, the International Energy Agency (IEA) said.

“The oil market is showing tentative signs of rebalancing, with global oil supplies surpassing demand for the first time since the outbreak of the war in Iran,” the adviser to major economies said in a monthly report.

Oil exports from the Gulf have rebounded to 74% of pre-war levels due to a surge from Saudi Arabia and fellow Opec member Iraq, even as tankers continue to come under attack, the IEA said. Observed oil inventories increased in October for the first time since June, it added.

The agency bolstered estimates for global oil supplies in 2026 by a substantial 920,000 barrels a day. While world markets as a whole face a deficit this year because of the war’s disruption to output, the annual shortfall is 60% lower than projected in last month’s report. 

Rebounding supplies from the Middle East — coupled with signs that President Donald Trump may refrain from renewed military action in Iran — have helped lower oil prices. Benchmark crude is down about 18% this month, offering relief to consumers and central banks from the pressure of high fuel costs. 

The outlook for markets of gasoil and diesel fuel — a pressing concern recently for the economy and even the US president — has “marginally improved” as high prices reined in consumption, the Paris-based IEA said.

IEA members will speed up the release of remaining emergency oil stockpiles pledged earlier this year, discharging a further 71 million barrels through the end of February, according to the report. Last month, European nations promised to accelerate the process following criticism from the US for not acting quickly enough. 

World oil markets are set for an overhang of roughly two million barrels a day this quarter, compared with a deficit of similar size projected a month ago, the report indicated. For 2026 as a whole, there will be an average deficit of 685,000 barrels a day, considerably less than the shortfall of 1.7 million a day anticipated previously.

“Gulf exports recovered much faster than global oil demand,” the agency said. Shipments from the region, excluding Oman, reached 18.4 million barrels a day last month despite a wave of attacks on tankers, it said. 

Saudi Arabia raised crude production to 10 million barrels a day in October, while Iraq’s output reached a seven-year high of 4.6 million a day, according to the report.

There are still lingering signs of tightness created by the conflict. While observed oil inventories rose last month, the increase was dominated by barrels at sea, as onshore stockpiles remained at their lowest in a decade. 

Global oil demand will fall by 2.68 million barrels a day this year, a slightly steeper decline than forecast in last month’s report, to average 102.3 million barrels a day, according to the report. 

While consumption is set to rebound next year, it will remain below 2025 levels, with the growth concentrated in petrochemical feedstocks while “high prices, electrification and fuel efficiency” temper the rebound in vehicle fuels. 

The supply surplus emerging this quarter is projected to widen significantly next year, the IEA estimates.

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