The IEA says the oil market is returning to surplus for the first time since the Iran war

What happened

The world oil market is returning to surplus, the International Energy Agency (IEA) said in its monthly report on 13 November. It expects supply to average 105 million barrels a day in the fourth quarter, 1.7 million more than demand, after previously forecasting a deficit. "The oil market is showing tentative signs of rebalancing," the agency said, with "global oil supplies surpassing demand for the first time since the outbreak of the war in Iran".

Brent crude was little changed after the report, near $95.70 a barrel.

Why supply is coming back

Gulf producers have been restoring exports disrupted since the war began at the end of February, partly through what the IEA calls "dark crossings" of the Strait of Hormuz, in which tankers switch off their tracking signals. OPEC+ countries pumped 41.23 million barrels a day of crude in October, up about 2 million from September and 97% of their prewar volume, according to OPEC data. Output in the US, Canada, Brazil, Argentina and Guyana is also set to rise by 1.6 million barrels a day this year. Governments are releasing 71 million barrels of emergency stocks pledged in March.

Why demand is falling

High prices have done what they usually do: cut consumption. The IEA expects world demand to fall by 2.7 million barrels a day this year, to 102.3 million, before rebounding by 2 million in 2027. For next year it expects a surplus of about 3.8 million barrels a day as Gulf output recovers. This is the self-correcting part of an oil shock that our scenario if oil stays above $100 describes: high prices encourage supply and discourage demand.

So why is oil still near $96?

A surplus on paper is not the same as secure supply. Flows still depend on tankers crossing a contested strait, Iran remains under a US blockade, and peace efforts remain uncertain. Prices include a premium for the risk that supply is cut again (our story). Our oil shocks mechanic explains how supply, demand and fear combine in the price.

Where it sits in the chain

This is Link 4, energy: a return to surplus would, over time, ease the inflation that the oil shock caused.

What to watch

• OPEC+ output decisions, and Gulf export data.
• Any start to US–Iran talks.
• Whether Brent's futures curve shifts from backwardation, near-term prices above later ones, towards contango.