IEA warns of oversupplied oil market but says sanctions on Russia, Iran could tighten supply

[Global Oil Market and Financial Trading]

While oil market balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026, additional sanctions on Russia and Iran may curb supplies from the world’s third and fifth largest producers, the International Energy Agency said.

Global oil supply growth has been revised up by 370 kb/d to 2.5 mb/d this year and by 620 kb/d to 1.9 mb/d in 2026, after the eight OPEC+ members subject to voluntary output reductions agreed on August 3 to raise production by another 547 kb/d in September, fully unwinding the 2.2 mb/d cuts agreed to in November 2023 since April.

Global oil demand growth for 2025 has meanwhile been repeatedly downgraded since the start of the year, by a combined 350 kb/d.

Demand is now projected to rise by around 700 kb/d this year and next. The latest data show lackluster demand across the major economies, and, with consumer confidence still depressed, a sharp rebound appears remote, the agency said.

Consumption in developing economies as well has been weaker than expected, with China, Brazil, Egypt and India all revised down.

Global observed oil inventories rose for the fifth consecutive month in June, up 28.1 mb m-o-m, or almost 900 kb/d, to reach a 46-month high of 7 836 mb, the IEA said.

WTI crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) eased 0.4% to $62.91/bbl at the time of writing, and Brent crude (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) fell 0.4% to $65.88/bbl.

OPEC raised its expectations Tuesday for global oil demand growth next year while also lowering the supply growth forecast for producers outside the wider OPEC+ group, signaling a tighter oil outlook, and the U.S. Energy Information Administration expects U.S. output to decline in 2026.

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