The global oil market is showing signs of returning to surplus as Middle Eastern producers restore exports disrupted by the war in Iran, according to the International Energy Agency. The shift comes despite continued attacks on tankers and elevated geopolitical risks, with recovering supply now outpacing demand and reducing pressure on the global crude market.

Supply Moves Above Global Demand

The IEA expects global oil supply to average 105 million barrels per day in the fourth quarter, approximately 1.7 million barrels per day above projected demand. The agency had previously forecast a supply deficit for the period, making the latest revision a significant change in its assessment of market conditions.

The IEA said the market is showing tentative signs of rebalancing, with global supplies surpassing demand for the first time since the outbreak of the war in Iran. Oil prices reversed earlier gains following the report, with Brent crude last down 0.1% at $95.71 a barrel.

Gulf Producers Restore Export Capacity

A major factor behind the changing balance is the recovery of Middle Eastern exports. Gulf producers have increasingly used alternative shipping routes and so-called dark crossings through the Strait of Hormuz, in which tankers switch off tracking signals to reduce exposure to attacks.

OPEC+ production also rose sharply. The group pumped 41.23 million barrels per day of crude in October, according to OPEC data, an increase of about 2.04 million barrels per day from September and equivalent to 97% of its pre-war February production level.

Supply growth is also coming from outside OPEC+. Production from the United States, Canada, Brazil, Argentina and Guyana is expected to increase by 1.6 million barrels per day this year, adding further supply to an already loosening global market.

Demand Weakness Adds to the Surplus

Higher oil prices have also contributed to weaker consumption. The IEA forecasts that global oil demand will fall by 2.7 million barrels per day in 2026 to 102.3 million barrels per day before rebounding by 2 million barrels per day in 2027.

The combination of recovering supply and softer demand has led other analysts to anticipate excess production as well. JPMorgan forecast a global surplus of 1.4 million barrels per day in October, reinforcing the view that the market balance is shifting away from the tight conditions seen earlier in the year.

2027 Supply Outlook Remains Large but More Uncertain

The IEA projects global oil supply to rise by 6.6 million barrels per day in 2027 to 108.1 million barrels per day, led by a further recovery in Gulf output. The agency nevertheless reduced its supply-growth forecast by 1.1 million barrels per day from its previous monthly report, partly because of a downward revision to Iranian production.

For 2027, the IEA expects the global supply surplus to reach approximately 3.8 million barrels per day, slightly below its previous estimate of 3.94 million barrels per day. The outlook will depend heavily on the pace of Gulf export recovery, the continuation of shipping disruptions and the trajectory of global demand. For energy markets, the key question is whether rising production can continue to outpace consumption without another geopolitical disruption tightening supply.