Oil: the IEA is optimistic again – supply set to exceed demand once more from 2027
The return of supplies from the Persian Gulf will be ‘gradual’, but the International Energy Agency forecasts that, as early as next year, the surplus conditions that kept the price per barrel under pressure before the war will return
According to the International Energy Agency (IEA), the impact of the war in the Persian Gulf will be short-lived on the oil market; the agency forecasts a return to a significant supply surplus as early as next year: as much as 4.7 million barrels a day, compared with a shortfall of 920,000 bg in 2026. This renewed abundance, it notes, could ‘give the market a welcome breather, offering the opportunity to replenish depleted stocks or build up new strategic reserves’.
The IEA’s initial forecasts for 2027, published two days ahead of the crucial meeting in Switzerland at which the United States and Iran are expected to sign an agreement to end the conflict and restore shipping through the Strait of Hormuz, are characterised by optimism.
The Paris-based agency acknowledges that the path towards a full recovery in supplies from the Gulf will be ‘gradual’ and potentially bumpy: “Operational and political constraints, including protracted demining operations and unresolved issues regarding transit arrangements, pose downside risks to the outlook,” reads the monthly report published on Wednesday 17th.
The baseline scenario, however, suggests that the market will normalise relatively quickly, followed by a return of the fundamentals to the ‘old’ imbalances that kept the price per barrel under pressure: namely, oil supply far exceeding demand.
Before the war, the IEA had long been known for taking a far more bearish view of the market than most analysts, a fact that forced it to make significant and repeated revisions to its estimates from March onwards. The latest report is no exception.
