The International Energy Agency is predicting an oil glut coming to market in 2027, as the war in Iran looks to wind down and global demand falls.
“Our first look at 2027 balances shows a significant overhang emerging next year,” the IEA wrote in its most recent monthly market report on Wednesday.
“This may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis.”
At the top line, the IEA is modeling growth in oil demand of 2 million barrels per day (mbd), bringing total demand up to 105.3 mbd, while supply is “set to surge” by roughly 8 mbd to a total 110 mbd.
On the supply side, the IEA argues that if the deal between the US and Iran can hold firm, oil production throughout the Gulf region will begin to recover, while other regions such as the Americas continue to boost their own production.
For the IEA, however, the focus is on demand. The agency predicts that global demand will fall by 1.1 mbd year-on-year in 2026, a downgrade of 700,000 bpd from the IEA’s May report. The agency cites a 5 mbd drop in deliveries “in the face of higher fuel prices and disruptions to product availability.”
Added up, the IEA’s 2027 forecast implies that supply will outweigh demand by 5.05 mbd next year as demand is outpaced.