It is more likely than not that the oversupply of oil on the market in January was much lower than originally expected.
International Energy Agency has revised their outlook on the global oil markets, and specifically reduced its previous expectations regarding the size of the surplus supply.
The adjustment had been made in the previous month’s report.
Key drivers of supply
The IEA has made a significant adjustment to its model, indicating that it now expects a closer balance between global crude oil demand and production than was previously predicted. This is due to a re-evaluation of factors affecting both supply and consumption.
The current surplus has been driven by a surge in the oil supply since the start of 2025.
In its monthly report for January, the IEA stated that non-OPEC+ producers were responsible for 60% of this total increase in 3 million barrels a day.
Saudi Arabia has led the increase in OPEC+ supplies as production was lifted.
Similarly, five American countries have been driving the increase in non-OPEC+ production: The United States, Canada Brazil Guyana and Argentina.
In 2026, the global oil supply is expected to increase by 2.5 million barrels per day.
Forecasts by agency, inventory and outages
The forecast depends on two factors. First, OPEC+ must maintain its current policy of production. Second, there should be no major disruptions, especially in the US shale patches.
This, combined with the large surplus in tanks at sea and in storage over the last year, would give the market a buffer that is well above the demand which, according to forecasts, will increase by 930 Kb/d.
The IEA’s December report stated that the demand for 2026 is expected to be 860,000 bpd in this year.
The three agencies that deal with energy will be presenting their latest forecasts next week. These are OPEC and the IEA, as well as the US Energy Information Administration.
Barbara Lambrecht is a commodity analyst with Commerzbank AG. She said that due to the numerous power outages, the oil industry will likely revise its expectations of global demand for this year upwards.
Bloomberg’s survey shows that OPEC daily production of oil dropped 230,000 barrels from December to January.
The decline in production was partly attributed to the lower Venezuelan output, while Kazakhstan reported significant production interruptions.
Due to the winter storm that hit the US, EIA is likely going to adjust January’s US oil production numbers, bringing them down a little.
According to the latest EIA report, US crude oil stocks dropped by 3.5 millions barrels in one week.
The gasoline stocks increased by 685, 000 barrels while the distillate stock fell by 5,6 million barrels.
The API data showed that crude oil declined by more than 11 million barrels, gasoline increased (by 4.7 million barrels), while distillates dropped (by 4.8 million barrels).
Commerzbank says that the inventory data was distorted due to the winter storm. However, the effect on the stock levels is less than anticipated.
Last week, the domestic crude oil production fell only by 488,000 barrels a day.
The modest drop in stocks, coupled with a small decline in crude oil production and an increase of net crude imports prevented a larger reduction.
Price forecasts and analyst assessments
Lambrecht stated that the overall oversupply of oil at the start of this year was likely to be lower than expected.
According to Lambrecht, the oil price could temporarily rise as energy companies lower their forecasts for oversupply in this year.
Lambrecht continued, “However we remain fundamentally firm in our belief that an oversupply of goods will lead to a fall in prices over the next year.”
It is important to remember that the outages in production are temporary. OPEC+ will likely increase its production starting April.
Brent crude oil is also at $67.53 a barrel.
The post Oil finds support in short term as supply eases and bearish risks persist may be updated as new developments unfold.
