The world is heading towards a significant oil surplus that could see an excess of four million barrels per day flooding the market by next year, according to a stark warning from the global energy watchdog.
Growing Imbalance in Global Oil Markets
The International Energy Agency (IEA) revealed that the anticipated surplus in 2026 is likely to be larger than previously forecast, despite efforts by major oil producers to pause planned increases in crude exports.
The Paris-based agency, established to monitor global oil supplies after the 1973 oil crisis, pointed to slower-than-usual growth in world oil demand as the primary driver behind the growing glut.
Global oil market balances are looking increasingly lopsided, the IEA stated, as world oil supply continues to forge ahead while oil demand growth remains modest by historical standards.
Controversial Forecasts and Climate Scenarios
The oversupply warning emerged alongside the agency's flagship energy outlook report, which included a contentious scenario where global oil demand would continue growing until 2050.
This model, which takes a conservative view of global climate action, had been dropped in 2020 after the IEA faced repeated criticism for underestimating renewable energy growth in its annual reports.
The IEA reinstated the scenario this year as world leaders gathered in Belém, Brazil, for Cop30 climate talks, following calls from the White House to present a more optimistic outlook for oil's future. However, the agency has denied yielding to US pressure in reintroducing this forecast.
Critics argue the forecast underestimates the rapid adoption of electric vehicles, particularly in developing Asian nations, a trend already contributing to reduced global oil demand.
Renewable Energy's Irreversible Momentum
The IEA's report also featured two main scenarios projecting oil consumption peaking by 2030, driven by strong uptake of electric vehicles and renewable energy.
In all scenarios, renewable energy is expected to at least double over the next five years. The outlook suggests the world will likely deploy more renewable energy projects in the coming five years than it has over the past four decades.
The Global Wind Energy Council highlighted there is now irreversible momentum towards the age of electricity, with every IEA scenario showing renewable energy growing faster than any other major energy source.
A spokesperson emphasised that an outdated political narrative should not distract from this data-driven reality of renewable energy's accelerating dominance.
In its monthly assessment, the IEA expects global oil supply to grow by approximately 3.1 million barrels per day in 2025 and 2.5 million bpd next year, with each figure representing an increase of about 100,000 bpd from previous estimates.
With supply consistently outpacing demand, the IEA's latest analysis indicates that by 2026, total oil supply will be 4.09 million bpd higher than total demand, up from an implied surplus of 3.97 million bpd in last month's report.
