Key points:
- With the recovery of exports in the Gulf region, oil prices have fallen by 32% from their peak levels.
- Despite the ongoing conflict in Iran, IEA still expects an oversupply of global crude oil.
- As crude oil prices plummet, diesel shortages continue to persist.
The International Energy Agency ( IEA ) predicts that despite ongoing attacks on energy infrastructure and oil tankers during the Iran war, global crude oil supply is set to return to surplus; meanwhile, oil prices have fallen by 32% from their October highs.
According to the "November Oil Market Report" released on Friday by IEA, the physical benchmark price of North Sea Dated crude oil has fallen from $136 per barrel on October 8 to around $93.
Brent crude oil futures are trading around $95.54 per barrel, while US West Texas Intermediate (WTI) crude oil futures are trading around $88.18 per barrel. After experiencing historic drops in oil prices earlier on, both benchmarks are on their way to a second consecutive week of decline.
IEA It is expected that an oversupply of crude oil will occur as Gulf production recovers.
IEA It is expected that global crude oil supply will exceed demand in the fourth quarter of 2026, reversing the shortage that dominated the market earlier this year.
In October, global production increased by 2.3 million barrels per day to reach 105.4 million barrels per day, following a 3 million barrel per day increase in September.
Despite continued disruptions in shipping, crude oil exports from the Gulf region have resumed to 15 million barrels per day, which is about 82% of the pre-war level.
This rebound is related to the recovery in OPEC+ production, with Saudi Arabia making a significant contribution to the recent increase.
Meanwhile, IEA expects global demand to decline by 2.7 million barrels per day in 2026 to 102.3 million barrels per day, reflecting high energy prices and disruptions to industrial activities.
IEA It is expected that demand will rebound by 2 million barrels per day in 2027, but the supply will grow even faster, reaching 108.1 million barrels per day by then.
Crude oil inventories increased by 52 million barrels, but diesel remains expensive.
Supply recovery has already begun to affect global inventories.
In October, there was an observed increase in crude oil inventories by 52 million barrels, marking the first monthly growth since June; during the same period, offshore oil storage also surged by 86 million barrels.
However, land-based inventories are still declining and remain at their lowest levels since at least 2016.
This differentiation also explains why the latest assessment of IEA differs from the previous prediction of EIA that Brent crude would be close to $100.
The improvement in the physical market is not even. Despite a 32% decline in crude oil prices, diesel prices in Europe remain close to $180 per barrel, which is about 77% higher than pre-war levels.
Refining disruptions and restrictions on diesel exports continue to affect fuel supply, even though more crude oil has flowed into the global market.
Oil Price Outlook: Will Brent continue to fall?
According to the predictions of IEA, as Gulf exports return to normal and inventories rise, oil prices may continue to face pressure.
However, the outlook remains vulnerable to further attacks on energy infrastructure, including the shipping routes near the Strait of Hormuz.
Previously, concerns about the escalation of the Iran-War had shown how quickly geopolitical events can affect crude oil prices.
The market also reacted strongly to the diplomatic progress between the United States and Iran; expectations of a reduced risk of military escalation accelerated selling in November.
For Brent to continue to rise above $100, there needs to be stronger demand or renewed concerns about supply; if excess supply persists, the $90 range may come under pressure.
The latest report also contrasts with OPEC+’s previous decision to freeze production, indicating that changes in export destinations may outweigh the impact of production policy statements.
