Oil Market Returns to Surplus as Gulf Exports Recover, IEA Reports

Who fills the gap outside the Gulf?

Five countries in the Americas carry much of that weight. The United States, Canada, Brazil, Argentina and Guyana are expected to increase combined production by 1.6 million barrels per day this year. Looking further ahead, the IEA forecasts that global oil supply will recover by 6.6 million barrels per day to 108.1 million barrels per day in 2027. Gulf producers are expected to account for 5.3 million barrels per day of that increase, while the five major producers in the Americas contribute another 1.1 million barrels per day.

Why is demand still under pressure?

Global oil consumption continues to face headwinds from disrupted exports of refined petroleum products and liquefied petroleum gas (LPG, a fuel used for heating and cooking) from the Gulf, alongside persistently high fuel prices. Exports of refined products and LPG from the region remain at roughly half of their pre-war levels.

The contraction is easing, however. The pace of decline in global demand is expected to moderate to 2.7 million barrels per day year-on-year in the fourth quarter of 2026, compared with drops of 5 million barrels per day in the second quarter and 3.8 million barrels per day in the third. For the full year, global demand is projected to fall by an average of 2.7 million barrels per day.

The IEA expects the shortfall relative to 2025 levels to narrow further, with demand returning to growth around March 2027. For the full 2027 year, global demand is projected to rise by 2 million barrels per day. Petrochemical feedstocks — the raw materials used to make plastics and chemicals, and among the products most severely affected by the conflict — are expected to account for almost 80 percent of that projected growth.

The agency cautioned that high fuel prices, increasing electrification and improved fuel efficiency in the global vehicle fleet will continue to restrain the recovery in demand for road transportation fuels.

What risks remain for 2027?

The IEA's November assessments indicate the market will return to surplus in the fourth quarter of 2026, with a more substantial build-up expected in 2027. Yet the outlook carries significant downside risks. Attacks on shipping threaten maritime security and could undermine a sustained recovery in global oil flows.

The agency identified persistent tightness in refined product supplies — particularly diesel — as the most pressing concern for the broader market and for consumers. Continued attacks on Russian energy infrastructure are restricting that country's diesel supplies to international markets, compounding production and export losses from the Middle East. Diesel scarcity functions like a shortage of flour in a bakery: when one input runs short, the effect spreads through everything downstream.

Some relief is coming from refineries. In the Atlantic Basin, particularly in the United States, refineries are operating at high rates to capture attractive refining margins. In Asia, improved crude availability and fresh Chinese export quotas for refined petroleum products could support increased refinery operations and higher product supplies.

The IEA also highlighted its own planned intervention: an accelerated release of emergency diesel stocks over the coming months, intended to bridge the supply gap. Those releases, the agency said, will provide critical support to international markets until global refining operations and petroleum product output recover sufficiently.

The report's findings point to an improving outlook for crude oil supplies. Persistent disruptions to refined product markets, particularly diesel, and ongoing threats to maritime transportation, however, continue to expose the global oil industry to significant uncertainties.

By Priya Raman