IEA Says Global Oil Market Returns to Surplus for First Time Since Iran War Began

The International Energy Agency declared in its November monthly report that the global oil market swung into surplus in October 2026 for the first time since the outbreak of the Iran war, driven by rebounding Persian Gulf exports despite continued attacks on energy infrastructure and tankers. The IEA projects a surplus of 1.7 million barrels per day in the fourth quarter of 2026, with an even more substantial supply build expected through 2027.

Diesel and refined product markets remain a critical concern despite the crude surplus. European diesel prices are still 77% above pre-war levels, and Federal Reserve Bank of Chicago President Austan Goolsbee warned that diesel and jet fuel prices will stay elevated even if crude oil drops quickly. IEA emergency stock releases are set to continue picking up through February to help ease product supply tightness.

Asian refiners are returning to Gulf crude purchases as freight rates fall sharply. Oil freight rates on routes outside the Persian Gulf have dropped 50% to 75% from their mid-September peak, and Chinese, Japanese, and Thai refiners are increasingly taking Middle Eastern cargoes even on routes transiting the Strait of Hormuz, drawn by discounts Gulf producers are offering relative to regional benchmarks. Iraq has separately revived a long-dormant overland export route, trucking 120,000 to 150,000 barrels per day through Syria to the port of Baniyas under a contract with Qatari group UCC Holding, as the Strait of Hormuz remains disrupted.

Russia's October revenues from crude and petroleum product exports hit their highest level since May, lifted by stronger oil prices. However, rising Middle Eastern supply is intensifying competition for buyers, pushing Urals discounts at loading ports to their highest since April 2023, with India now paying a discount rather than a premium for Russian crude. Brent crude was trading near $96 to $97 per barrel Friday, with WTI at $88.88, while RBOB gasoline futures were more subdued at $2.66. The Caspian Pipeline Consortium increased exports 6% in October to 1.69 million barrels per day, aided by a decline in Black Sea drone attacks, though a widening price gap of more than $14 per barrel between CPC Blend and Azerbaijani Azeri BTC grades underscores ongoing Black Sea security risks.