OPEC+ suspends production increase, demand improves, IEA lowers oil surplus expectations for the first time since May

The International Energy Agency (IEA) has lowered its global oil supply surplus forecast for the first time since May, as demand strengthens and production growth slows. The agency has reduced the surplus estimates for both this year and next year. On December 11, the IEA revised its 2026 global oil supply surplus forecast down from last month's 4.046 million barrels per day to 3.815 million barrels per day, a decrease of 231,000 barrels per day. This is the first reduction in surplus expectations since the OPEC+ alliance began increasing production in May, and this year's surplus forecast is also the first reduction since February. This adjustment reflects several key factors: OPEC+ decided last month to suspend production increases, slightly lowered estimates of competitor production, and improved global oil consumption prospects. The IEA noted in its report that the global oil surplus forecast for the fourth quarter of 2025 has narrowed compared to last month's report, stating that "the relentless surge in global oil supply has come to a halt." Meanwhile, "improvements in macroeconomic and trade prospects" are boosting demand. OPEC+ Suspends Production Increase, Demand Improves The policy adjustments by the OPEC+ alliance have become a key factor in alleviating surplus expectations. According to a previous article from Wall Street Journal, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) confirmed that they will maintain the suspension of production increases in the first quarter of 2026. As OPEC+ continues to suspend production increases, global oil supply has seen a "significant" decline, decreasing by 1.5 million barrels per day from the record levels in September, with production declines from OPEC+ members Russia and Venezuela, while Kuwait and Kazakhstan faced unplanned outages. At the same time, the IEA slightly raised its global oil consumption growth forecast, with an increase of 830,000 barrels per day in 2025 and a slight increase in 2026. Global oil demand is expected to average a record 103.9 million barrels per day this year. The IEA stated that "improvements in macroeconomic and trade prospects" are boosting demand. It is worth noting that despite the adjustments, the supply surplus in 2026 will still set an annual record, second only to the levels seen during the demand collapse in 2020 due to the COVID-19 pandemic. Additionally, global oil inventories have risen to a four-year high, including a significant increase in offshore supplies, but this situation has not yet clearly manifested in major storage hubs. The IEA pointed out that part of the surplus supply comes from sanctioned producing countries such as Iran, Russia, and Venezuela. This contrasts with the tightness in certain oil product markets, which is driven by refining capacity constraints. Top trader Trafigura Group previously warned that the supply surplus could evolve into a "super surplus."