The IEA lifted its oil demand outlook but warned supply growth continues to overwhelm consumption, keeping surplus risks firmly in place.
Summary:
IEA raises 2026 oil demand growth forecast to 930k bpd
Supply growth still far exceeds demand at 2.5mbpd
December output fell, but surplus remains intact
Refinery maintenance risks renewed oversupply in 1Q
Inventories remain elevated, including oil held at sea
The International Energy Agency has raised its forecast for global oil demand growth this year, citing a firmer economic outlook and lower crude prices, but cautioned that supply is still expected to exceed consumption, leaving the market structurally oversupplied.
In its latest monthly report, the IEA said global oil demand is now projected to rise by around 930,000 barrels per day (bpd), up from a previous estimate of 860,000 bpd. The upgrade reflects improved macro conditions and some price-led support for consumption, following demand growth of roughly 850,000 bpd last year.
However, the agency simultaneously lifted its supply growth forecast to 2.5 million bpd, reinforcing expectations that production will continue to outpace demand in 2026. While global supply fell by about 350,000 bpd in December, the IEA said this only modestly reduced the surplus that has built up since the start of the year.
Production from the OPEC+ group edged lower in December, slipping by around 20,000 bpd as output declined across several Middle Eastern producers, partially offset by stronger Russian flows. Non-OPEC+ supply also fell by roughly 250,000 bpd, largely due to seasonal declines in biofuel output.
Despite these declines, the agency warned that the near-term balance remains fragile. With seasonal refinery maintenance approaching, crude demand is set to soften further, increasing the risk that a sizeable surplus re-emerges unless producers implement additional supply restraint.
The IEA estimates the overhang in global crude and condensate markets averaged around 1.1 million bpd last year, driving a sharp rise in inventories. Total crude stocks increased by more than 400 million barrels, with a large share held at sea, including volumes linked to sanctioned producers such as Russia, Iran and Venezuela.
While geopolitical risks remain elevated, the agency said it is still too early to judge whether recent developments in Iran and Venezuela will materially tighten supply. For now, the IEA argues the market remains well supplied, with surplus risks skewed to the downside.
