Oil market shifts to surplus as Iran conflict eases

In October, oil production exceeded demand by approximately 2 million barrels per day, the Paris-based agency reported, attributing the change to a quicker-than-anticipated recovery in exports from the Gulf region.

The IEA noted that the market is demonstrating “tentative signs of rebalancing,” with supply now exceeding demand for the first time since the conflict began.

The earlier conflict had disrupted the global oil market, impacting shipments through the Strait of Hormuz, a vital waterway for roughly a fifth of the world’s oil and gas supply. This disruption led to a surge in energy prices, with Brent crude, the international benchmark, rising from around $72 a barrel in February to $126 a barrel by late April.

This week, prices dipped to their lowest point since late August, reaching $89.66, following comments from US President Donald Trump who declared the war with Iran “effectively over.” Brent crude was valued at approximately $95 a barrel on Friday.

Despite the easing of tensions, concerns persist regarding continued attacks on oil tankers in the Middle East, and reports suggest some Iranian officials suspect potential future military actions by the US.

The IEA anticipates that global oil supply will average 105 million barrels per day during the final three months of the year, exceeding forecasted demand by 1.7 million barrels. This represents a change from previous expectations of a supply deficit.

The increased supply has also alleviated pressure on emergency oil stockpiles, which were depleted due to the Iran conflict. The IEA’s member countries will accelerate the release of previously pledged emergency oil reserves, adding an additional 71 million barrels to the market by the end of February. These reserves are strategically located in refineries, terminals, power stations, and offshore fields in the North Sea.

The Opec+ oil cartel reported producing 41 million barrels per day in October, a significant increase from approximately 2 million in September, representing 97% of pre-conflict levels.

Global oil demand is projected to decrease by 2.68 million barrels per day this year, reaching 103.2 million barrels per day. While a rebound is expected next year, demand is still anticipated to remain below 2025 levels, largely due to factors impacting vehicle fuel consumption, including high prices, the rise of electric vehicles, and improved fuel efficiency.