The IEA in its monthly oil report projected global oil supply would exceed demand by 4.25 million barrels per day in the first quarter

The global oil market will be in deep surplus in the first quarter of 2026, the International Energy Agency said on Wednesday, as so far excess supplies have offset the geopolitical risk of disruption.

The IEA, which advises industrialised countries, in its monthly oil report projected global oil supply would exceed demand by 4.25 million barrels per day in the first quarter. A surplus of that size would be around 4% of world demand and is larger than other predictions.

Oil prices have increased nearly 6% since the start of the year, as concerns about geopolitics and possible oil market disruption drove buying. Global benchmark Brent was trading at $65.02 at 1142 GMT on Wednesday, up 10 cents on the day.

Barring any significant disruptions to supplies in Iran, Venezuela, or further cuts from other producers, a significant surplus is likely to re-emerge in the first quarter of 2026, the IEA said.

For now, bloated balances provide some comfort to market participants and have kept prices in check, it said.

Supply has increased faster than demand mostly because OPEC+ began boosting output in April 2025 after years of cuts. Other producers, such as Guyana, the U.S., and Brazil, have also increased production.

OPEC+ has, however, paused its output hikes for the first quarter of 2026.

For the whole year, the market faces an implied surplus of 3.69 million bpd, the IEA’s latest figures on Wednesday indicated, a downward revision from 3.84 million bpd in last month’s report.

Helping to erode the surplus forecast, the IEA revised up its prediction for world oil demand growth by 70,000 bpd to 930,000 bpd, citing what it called a normalisation of economic conditions after last year’s tariff turmoil, and lower oil prices than a year ago.

The IEA said it is too early to assess the full implications of all the latest geopolitical developments on the oil market, but said the U.S. blockade on Venezuelan oil shipments had lowered exports by 580,000 bpd from December to early January.