The global oil market could swing from one of the largest supply disruptions in history to a surplus of more than 5 million barrels per day next year if Middle East production and exports recover following the U.S.-Iran peace agreement, the International Energy Agency (IEA) said on Wednesday, as reported by Reuters.
In its first outlook for 2027, the Paris-based agency forecast global oil supply growth of 8 million barrels per day, far outpacing projected demand growth of just 2 million bpd. The result would be a supply surplus of roughly 5 million bpd, creating a wildly different market atmosphere after months of war-driven shortages.
The forecast assumes a gradual recovery in Gulf oil production and exports following the reopening of the Strait of Hormuz and the lifting of restrictions on Iranian oil exports.
“If the deal holds, exports and production from the Gulf should see a gradual recovery, not least because Iranian oil exports can fully resume once the U.S. blockade is lifted,” the IEA said in its monthly oil market report.
The agency estimates that the Iran conflict blocked more than 14 million bpd of Middle Eastern oil production and exports, triggering massive inventory drawdowns and sending governments around the world scrambling for alternative supplies and new energy security strategies.
Oil inventories have fallen at a rate of 3.8 million bpd since the outbreak of the war in late February, according to preliminary IEA data. Stock draws accelerated to roughly 4.6 million bpd in May alone as governments and refiners tapped into reserves to fill the gaps.
The IEA cautioned that a full recovery remains far from certain. Political uncertainty, prolonged demining operations and unresolved shipping arrangements could slow the return of Middle East barrels even after a formal peace agreement is signed.
While the agency expects inventories to continue falling in the near term, it said a large supply overhang could emerge by late 2027. That surplus would allow countries to rebuild depleted emergency reserves and replenish commercial inventories after more than a year of extraordinary stock draws.
By Charles Kennedy for Oilprice.com
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