In its most recent Oil Market Monthly Report, the International Energy Agency (IEA) lowered its projections for oil demand growth for this year, while increasing its expectations for supply growth, indicating a significant supply overhang. IEA highlights that global oil inventories are already surging, particularly oil stored in tankers on water.
IEA data shows that global oil demand actually expanded by 750,000 b/d year-on-year (y-o-y) in third-quarter 2025, led by a rebound in petrochemical feedstock use following the tariff-induced slowdown in second-quarter 2025. However, the agency expects oil consumption to stay subdued through the rest of 2025 and in 2026, as weaker macroeconomic conditions and rising transport electrification weigh on demand.
Annual demand growth is now projected at around 700,000 b/d for both years, down from 740,000 b/d expected for 2025 in IEA’s September report. This growth is well below the 980,000 b/d pace seen in 2024 and markedly lower than the 1.3 million b/d average during the 2010s. Demand for 2025 and 2026 is now projected to be 103.8 million b/d and 104.5 million b/d, respectively.
Total global oil supply increased by 760,000 b/d month-on-month (m-o-m) in September to reach 108 million b/d, driven by a 1 million b/d surge in OPEC+ output, primarily from the Middle East.
In this month's report, IEA forecasts that global oil supply will increase by 3 million b/d to reach 106.1 million b/d in 2025, followed by an additional rise of 2.4 million b/d in 2026. This projection exceeds the September forecast of 2.7 million b/d supply growth for 2025 and 2.1 million b/d growth next year.
Non-OPEC+ producers account for 1.6 million b/d of this year’s growth and 1.2 million b/d next year, led by the US, Brazil, Canada, Guyana, and Argentina. OPEC+ output is expected to add 1.4 million b/d in 2025 and 1.2 million b/d in 2026, assuming current production agreements remain in place.
Refining
Global crude runs are set to drop to a seasonal low of 81.6 million b/d in October, nearly 4 million b/d below July’s record level, as refinery maintenance and escalating attacks on Russian infrastructure cut activity.
Overall, IEA expects global runs to increase by 600,000 b/d in 2025 and 460,000 b/d in 2026, reaching 83.5 million b/d and 84 million b/d, respectively. Refining margins strengthened across all regions in September, supported by higher diesel and jet fuel cracks following the disruptions to Russian refining and exports.
“Persistent attacks on Russian energy infrastructure have cut Russian crude processing by an estimated 500,000 b/d, resulting in domestic fuel shortages and lower product exports. The drop in Russian middle distillate exports reverberated globally as regular buyers scrambled to secure alternative supplies, bidding up diesel and jet fuel cracks in the process. Light sweet crude refining margins hit 2-year highs in Europe and 18-month highs on the US Gulf Coast and in Singapore in September,” said IEA.
Inventories
According to IEA data, global observed oil inventories climbed by 17.7 million bbl in August to a four-year high of 7,909 million bbl. A 36.2 million bbl build in products was partly offset by an 18.5 million bbl draw in crude, NGLs, and feedstocks. Total OECD stocks rose by 22 million bbl, while non-OECD inventories increased by 4 million bbl, bolstered by higher Chinese crude stocks.
In August, oil on water declined by 8 million bbl due to lower crude volume. However, preliminary data for September point to a sharp 102 million bbl build in oil on water, indicating a growing supply overhang.
“The oil market has been in surplus since the start of the year, but stock builds have so far been concentrated in crude in China and gas liquids in the US. By September, however, a surge in Middle East production, coinciding with seasonally lower regional crude demand, boosted exports to a two and a half-year high. This, combined with robust flows from the Americas, swelled oil on water in September by a massive 102 million bbl, equivalent to 3.4 million b/d, the largest increase since the COVID-19 pandemic,” said IEA.
Crude markets traded calmly through September, as a looming supply surplus dampened the bullish impact of heightened Ukraine tensions and fresh sanctions against Russia and Iran. Price volatility remained historically low.
