Latest: The European Commission’s Oil Coordination Group, meeting on Friday with EU countries, the IEA, the Energy Community, NATO and industry representatives, concluded that the EU’s oil supply remains stable for the time being. The group said crude and petroleum product prices have moderated recently but remain significantly higher than pre-conflict levels, that oil markets overall remain tight, and that it is important to stay vigilant. It also took stock of EU countries’ significant contribution in October to the IEA collective action on oil stock releases, in particular on diesel, and discussed the recently launched high-level dialogue with the EU refining sector.
The oil market is showing tentative signs of rebalancing, the International Energy Agency said in its November Oil Market Report, with global oil supplies surpassing demand for the first time since the outbreak of the war in Iran. Observed oil inventories rose by 52 million barrels in October, or 1.7 million barrels a day, as Gulf exports recovered much faster than global oil demand. North Sea Dated crude prices plunged by more than 30 percent from a high of 136 dollars a barrel on October 8 to around 93 dollars at the time of writing, though they remained 22 dollars above pre-war levels.
Global oil supply surged by 2.3 million barrels a day to 105.4 million barrels a day in October, lifting output by 5.3 million barrels a day since August and narrowing the year-on-year output decline to 2.9 million barrels a day, against an average loss of 8 million over March to September. Despite continued attacks on tankers, Gulf oil exports excluding Oman reached 18.4 million barrels a day last month, 26 percent below pre-war levels, led by crude flows of 15 million barrels a day, equivalent to 82 percent of pre-war volumes. The agency raised its fourth quarter supply estimates by 3.3 million barrels a day and trimmed the average annual 2026 supply decline to 4.8 million barrels a day, with the United States, Canada, Brazil, Argentina and Guyana on track to boost output by 1.6 million barrels a day this year. For 2027 it projects global supply recovering by 6.6 million barrels a day to 108.1 million, including a 5.3 million increase in Gulf production.
Demand remains weighed down by disrupted Gulf exports of refined products and LPG, still at roughly half of pre-war levels, and by high fuel prices. The pace of contraction is set to narrow to 2.7 million barrels a day year on year in the fourth quarter, from declines of 5 million in the second quarter and 3.8 million in the third, for an annual average fall of 2.7 million. The shortfall against 2025 is expected to ease before shifting to growth around March next year, giving an overall increase of 2 million barrels a day in 2027, with petrochemical feedstocks accounting for almost 80 percent of the gains.
The agency’s November balances point to a return to surplus in the fourth quarter of 2026 and a more substantial build in 2027, with the caveat that attacks on shipping remain a downside risk to the recovery. Its overriding concern for now is products rather than crude: severe tightness in product supply, especially diesel, persists as attacks on Russian energy infrastructure choke off that country’s diesel exports, Atlantic Basin refineries run hard to capture high margins, and an accelerated release of IEA emergency diesel stocks provides a bridge until refinery output recovers.