Record 2026 Oil Surplus Expands as OPEC+ Boosts Output

Ellen Wald, Senior Fellow at The Atlantic Council, discusses the latest OPEC+ boost on output as well as electricity demand constraints.

A record oil surplus projected for next year is looking even bigger as OPEC+ continues to revive production and the group’s rivals grow, the International Energy Agency said.

While the IEA boosted estimates slightly for global oil demand this year and next, it raised supply projections even more. World output will exceed consumption by an average of 3.33 million barrels per day in 2026, about 360,000 a day more than anticipated a month ago, according to the agency’s report. It’s a historic overhang in annual terms, though the surplus was briefly bigger at the height of the 2020 pandemic.

“A backdrop of higher OPEC+ supply and the prospect of increasingly bloated oil balances” is cushioning crude prices against geopolitical risks like sanctions on Russia and Iran, the Paris-based adviser to major economies said.

International oil prices traded near $67 a barrel in London on Thursday, leaving them down about 10% this year, though still more resilient than some had expected. While summer driving demand in the US and Chinese stockpiling are giving markets some support, Wall Street firms doubt the strength will last.

The OPEC+ alliance, led by Saudi Arabia, agreed at the weekend to start restoring a new layer of halted supplies more than a year early, with a modest increase of 137,000 barrels a day set for next month. Riyadh and its partners feel vindicated in having fast-tracked the restart of an earlier layer despite bearish warnings from forecasters.

The actual increment in October could be just 40,000 barrels a day as some of the key OPEC+ members are already above their assigned quotas, and have agreed to compensate for earlier overproduction, the IEA said. Nonetheless, the outlook for the group’s output in 2026 was upgraded.

Producers outside the Organization of the Petroleum Exporting Countries are also continuing to grow.

Non-OPEC+ nations led by the US, Brazil, Canada and Guyana will collectively raise output by 1.4 million barrels a day this year, approximately double the projected increase in global oil demand, according to the report. They will expand further in 2026, adding just over 1 million per day.

The agency raised estimates for global oil demand growth slightly this year, to 740,000 barrels a day, as “weaker oil prices and a somewhat improved economic outlook combine with firm reported deliveries in a number of advanced economies.”

With supply set to exceed demand so substantially, the IEA anticipates a massive global surplus of roughly 4 million barrels a day in the first half of 2026.

On a quarterly basis, the surplus seen in 2020 would remain the biggest on record, having peaked at more than 7 million barrels a day in the second quarter of that year as pandemic lockdown measures curtailed transportation and economic activity. That glut was subsequently pared by massive OPEC+ cutbacks.

The agency’s analysis chimes with that of the US government’s Energy Information Administration, which said on Tuesday that the global oil glut is already underway, having arrived earlier than expected.

World inventories had accumulated by 187 million barrels as of July, though they remained below their five-year average, according to the IEA. China absorbed about a third of the build-up, it said.

How the overhang impacts oil prices will likely hinge on continued appetite from Beijing, which has been stocking away bargain-price supplies into strategic reserves. If supplies continue to flow there, rather than to more visible locations like storage tanks in the west or on tankers at sea, it could limit the price downside.

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