IEA likely overestimates supply surplus in oil market - Commerzbank

The IEA expects a massive oversupply of 4 million barrels per day on the Oil market next year. However, the IEA's assumptions regarding supply are extremely ambitious, Commerzbank's commodity analyst Carsten Fritsch notes.

IEA projects 2026 Oil surplus

"Oil supply outside OPEC+ is expected to increase by a further 1.2 million barrels per day next year, following an increase of 1.6 million barrels per day this year. The IEA also assumes an increase of 1.2 million barrels per day for OPEC+. Oil demand, on the other hand, is expected to rise by only 700,000 barrels per day."

"The assumption for current OPEC+ Oil production included in the calculation is also around 1 million barrels per day higher than that of OPEC and S&P Global Commodity Insights. The only time there was an even higher surplus than the IEA expects next year was during the coronavirus pandemic five years ago, but that was only for two quarters."

"At that time, the price of Oil fell sharply as a result, leading to a noticeable reduction in supply from OPEC+ and also outside OPEC+. This brought the Oil market back into balance. It is thus questionable whether Oil supply would actually increase as much next year as the IEA assumes, given the prospect of such a high surplus. The oversupply is therefore unlikely to be as high as the IEA predicts."