World Oil Supply Forecast to Rise, Surplus Expected

The world oil supply forecast to rise into a surplus has raised new concerns for energy markets. The International Energy Agency (IEA) projects a significant increase in oil production, with global output expected to grow by 2.7 million barrels per day (bpd) in 2025 and 2.1 million bpd in 2026. In contrast, global demand is forecast to grow by just 740,000 bpd in 2025, creating a widening gap between supply and consumption.

The expansion in production is being led by non-OPEC countries such as the United States, Brazil, Canada, and Guyana, while OPEC+ members are also ramping up output faster than initially scheduled. The result is a projected surplus that could build oil inventories by 2.5 million barrels per day (bpd) in H2 2025, and as much as 3.3 million bpd in 2026 if production levels remain unchanged and demand growth stays flat.

These developments indicate continued downward pressure on oil prices over the next two years. Market backwardation—where future contracts trade at lower prices than current spot levels—may diminish as inventories rise. The Brent-Dubai spread is also expected to narrow due to excess supply of light sweet crudes from North America.

Key Insights:

• The world oil supply is forecasted to rise, with a surplus expected across major regions, primarily driven by shale and offshore developments.
• Market participants may need to revise forward pricing models and hedge strategies in anticipation of prolonged oversupply.
• Chinese stockpiling remains a factor, but is unlikely to absorb the expected excess.
• Global geopolitical risks—especially involving Russia and the Middle East—could still alter supply dynamics suddenly, but are not currently sufficient to counterbalance the surplus.

The surplus could redefine crude trade flows, with refiners opting for more affordable feedstock from new producers, especially in Latin America and Africa. Traders, investors, and policymakers must brace for price volatility and consider realignment of energy strategies through 2026.