Global oil supply will surpass demand in the fourth quarter for the first time since the outbreak of the US-Iran war, and this gap will widen significantly in 2027, the IEA said today.

In its latest Oil Market Report (OMR), the agency said that observed oil inventories rose by 52mn bl in October, the first monthly increase since June.

The IEA said global oil supplies rose by 2.3mn b/d in October, driven by the Mideast Gulf, bringing the increase since August to 5.3mn b/d. Production and exports from the Gulf have steadily risen over the past few months as NOCs and traders shuttle cargoes through the strait of Hormuz in the face of attacks in the waterway.

“Despite continued attacks on tankers, Gulf oil exports, excluding Oman, reached 18.4mn b/d last month, 26pc below pre-war levels,” the IEA said. The recent output surge suggests the global oil market will return to a surplus in the fourth quarter, with an even larger build in 2027, the IEA said. It projects the world to flip from a deficit of around 720,000 b/d this year to a surplus of 3.8mn b/d in 2027.

The agency said this year’s supply losses from the Mideast Gulf and Russia were being partially offset by growth from the Americas, including the US, Canada, Brazil, Argentina and Guyana, which are on track to boost combined output by 1.6mn b/d. Still, global oil supply is set to fall by 4.8mn b/d to 101.6mn b/d in 2026, before rebounding by 6.6mn b/d to 108.1mn b/d in 2027, it said.

“Downside risks to the forecast persist, as attacks on shipping undermine maritime security, which is pivotal to a sustained recovery,” it said.

A key driver of the global market’s rebalancing has been this year’s fall in demand, which has been driven by higher oil prices and lower refined product supply linked to the US-Iran and Russia-Ukraine wars.

“Global oil demand continues to be weighed down by ongoing disruptions to exports of refined products and LPG from the Mideast Gulf, remaining at roughly half of pre-war levels, and high fuel prices,” the IEA said, adding that attacks on Russian energy infrastructure continued to weigh on diesel supply.

Global oil demand is set to fall by 2.7mn b/d to 102.3mn b/d in 2026, before rebounding by 2mn b/d to 104.3mn b/d in 2027, the IEA said.

LPG/ethane and naphtha will account for 80pc of the 2027 increase, compared with modest gains for transport fuels as high prices accelerate electrification and fuel efficiencies for road transport.