IEA predicts slowing global demand for oil will lead to record surplus in 2026

The International Energy Agency says the world is heading straight into a record-breaking oil surplus in 2026, as global demand growth slows down and producers keep cranking out more supply.

In a report released from Paris, the IEA estimated that oil inventories will build up by 2.96 million barrels per day next year. That number beats the average stockpile rate seen during the peak of the COVID-19 crash in 2020.

Demand isn’t pulling its weight anymore. This year and next, global oil demand is growing at less than half the pace it did in 2023. Meanwhile, output is going up fast. The OPEC+ alliance, led by Saudi Arabia, has started bringing paused production back online.

And outside the group, more barrels are coming from the United States, Canada, Guyana, and Brazil. The IEA slightly raised its forecast for output in those regions for 2026, warning that “oil-market balances look ever more bloated” and that the supply picture is outpacing demand heading into next year. “It is clear that something will have to give for the market to balance,” the agency said.

Crude prices slide as Trump’s trade war clouds outlook

So far this year, crude prices have dropped by 12%, now trading around $66 per barrel in London. That’s happening right as OPEC+ and non-OPEC+ producers flood the market, and as fears grow that President Donald Trump’s trade war could slow the economy even more.

Trump, now back in the White House, has been pressuring for lower fuel prices. This decline gives him what he wants on that front, but it also puts oil-producing countries and companies in a dangerous spot.

Right now, oil demand is getting a little help from the strong summer driving season in the Northern Hemisphere. But even with that, the IEA says the market is already showing signs of oversupply. Global inventories hit their highest level in nearly four years in June.

The agency added that any new sanctions on Russia or Iran might change the outlook, but for now, the trend is clear; too much oil, not enough buyers. Back in Q2 2020, the world saw the largest quarterly surplus ever recorded, more than 7 million barrels a day, as lockdowns choked off demand.

That glut was brought down by huge OPEC+ production cuts. But now, the same coalition is reversing those moves. They’ve been restoring production and are on track to finish reviving a 2.2 million-barrel chunk by September, after confirming another output increase earlier this month.

OPEC+ struggles to control the flood

It’s unclear what OPEC+ plans to do next. The group hasn’t committed to any direction, so they might boost production again, pause, or cut back. The IEA said output from the full 22-nation coalition actually eased last month after Saudi Arabia pulled back from the surge in June during the Israel-Iran conflict.

But even with that dip, there were still countries pumping more. The United Arab Emirates pushed its production to 3.5 million barrels a day last month. That’s a new record, and it’s way beyond its official OPEC+ quota.

The bloc is facing pressure from all sides. The IEA said non-OPEC+ supply growth in 2026 is now expected to hit 1 million barrels per day, up by 100,000 from earlier forecasts. That growth is being led again by the U.S., Guyana, Canada, and Brazil.

On the demand side, things are not looking better. The IEA said global oil consumption will only rise by 680,000 barrels per day this year, the weakest pace since 2019. Next year, it might reach 700,000 barrels daily, still not enough to counter the flood of crude being produced. Weak demand in China, India, and Brazil is dragging those numbers down.

Looking further ahead, the IEA expects oil demand growth to flatline by the end of this decade as more countries move toward electric vehicles and cleaner energy alternatives. That long-term trend is another headache for producers banking on demand to bounce back.

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