ANALYSIS: IEA Oil Surplus Call Ties to OPEC+ Unwinding

VIENNA (DTN) — The International Energy Agency’s call for an even larger oil surplus by the end of the year versus its September forecast is directly tied to producer alliance OPEC+’s unwinding of output cuts.

In its October oil market report published Tuesday (10/14), the IEA also implied a heavily oversupplied market throughout 2026.

The Paris-based energy market watchdog lowered demand growth expectations for 2025 slightly by 30,000 bpd to 710,000 bpd. The bulk of the upward revision to its global oil inventory forecast was, however, tied to OPEC+ activity.

Specifically, the revisions related to OPEC+’s rapid and ongoing unwinding of output cuts that coincided with a surge in crude oil exports from the Middle East last month.

IEA now expects global oil supply to grow by 3 million bpd in 2025, up from 2.7 million bpd in last month’s report.

The agency estimated global production in September to have been 5.6 million bpd higher year-on-year, with OPEC+ accounting for 3.1 million bpd of the sizable increase.

Global oil supply in September reached a record 108 million bpd, up 760,000 bpd as production from OPEC+ — a 22-nation alliance of OPEC and partners outside its core membership of 12 — surged by 1 million bpd from August, according to the report.

OPEC’s own monthly report published on Monday, in contrast, estimated the group and its partners ramped up production by 630,000 bpd month-on-month in September.

In combination with healthy non-OPEC production growth, the supply push coinciding with a seasonal global refining lull, usually seen around October, has led to rapidly swelling volumes of oil on water, both in transit and in floating storage, as well as growing on-land inventories.

In fact, IEA reported that global observed oil inventories in August expanded for the seventh consecutive month to a four-year high of 7.909 billion bbl.

While floating storage was estimated 8 million bbl lower than in July, preliminary data for September pointed to surging volumes of oil on water of 102 million bbl.

The surplus in which the market has found itself since the beginning of the year may have been partially obfuscated by the uneven geographical distribution of inventory builds.

This was because those builds were concentrated in less data transparent markets like China, while US oil and product inventories, sans gas liquids, remained less affected by the 1.9 million bpd surplus.

A 300,000-bpd upward revision to 2026 supply growth, now estimated at 2.4 million bpd, and an unchanged demand growth figure implied an even larger surplus next year than previously estimated, now pegged at close to 4 million bpd.