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The global oil market faces an even bigger surplus next year of as much as 4.09mn barrels per day as Opec+ producers and rivals lift output and demand growth slows, the International Energy Agency said on Thursday.The outlook from the IEA, which advises industrialised countries, is the latest warning that the oil market is heading for oversupply. A surplus of 4.09mn bpd would be equal to almost 4% of world demand, and is much larger than other analysts’ predictions.“Global oil market balances are looking increasingly lopsided, as world oil supply is forging ahead while oil demand growth remains modest by historical standards,” the IEA said in its monthly report.Opec+, or the Organisation of the Petroleum Exporting Countries plus Russia and other allies, has been boosting output since April. Other producers, such as the US and Brazil, are also increasing supply, adding to glut fears and weighing on prices.Oil prices edged higher to around $63 a barrel after the IEA report to recoup some of the 2% drop on Wednesday after Opec shifted its 2026 outlook to a small surplus, having earlier seen a sizeable deficit.Global oil supply will grow by around 3.1mn bpd in 2025, and 2.5mn bpd next year, each up by around 100,000 bpd on the month, the IEA said.Supply is rising faster than demand in the IEA’s view even after upward revisions on Thursday. The agency now expects oil demand to rise by 770,000 bpd next year, up 70,000 bpd from last month, citing increased needs in petrochemical plants.The short-term outlook in the IEA’s monthly report contrasts with the agency’s annual outlook on Wednesday, which sees global oil and gas demand potentially rising until 2050.Opec sees a surplus of just 20,000 bpd next year according to Reuters calculations based on its own monthly oil market report on Wednesday, although this marks a further retreat from its forecast of a sizeable deficit.Global oil output was 6.2mn bpd higher in October than at the start of this year, divided evenly between Opec+ and non-Opec producers, the IEA said. Top Opec producer Saudi Arabia contributed 1.5mn bpd of the increase, while Russia added just 120,000 bpd amid sanctions and Ukrainian attacks.Russian oil exports have continued largely unabated despite new US sanctions on Russian firms Rosneft and Lukoil, which still may have the most far-reaching impact yet on global oil markets, the IEA said.The IEA added that new entities have already started handling Russian exports as it adapts to sanctions. In October, companies MorExport, RusExport and NNK, which have only been active since May, lifted around 1mn bpd of Russian crude and fuels, it said.The Paris-based IEA also drew attention to a sharp rise in global oil inventories, which rose to their highest since July 2021 in September at just under 8bn barrels.The increase was driven by a sharp increase in waterborne oil in storage, which rose by 80mn barrels in September.Preliminary October data shows further rises for global stocks, again driven by increasing waterborne barrels, the agency added.

As the oil market moves closer to a long-anticipated glut, traders are closely watching buying from China to see if it will absorb an excess that the world’s crude producing nations are set to pump.Earlier this year, China piled into the crude market to snap up millions of barrels, including some that went into its strategic storage. The buildup has since slowed down as the nation’s domestic demand picked up, but with expectations that Beijing will continue to amass barrels, its next steps are seen as critical.With China’s vast network of oil tank farms still a little over 50% full, according to OilX data, traders say another spree would limit the damage from a long-anticipated glut in other parts of the globe. That’s significant because if China’s buying is elevated, it will prevent a buildup of supply in a narrow set of hubs in Midwestern America and Northwest Europe, limiting how far prices can fall.“The key question is where stockbuilds will turn up,” HSBC Holdings Plc analysts including Kim Fustier wrote this week. “If China continues to absorb excess oil volumes via its strategic reserves, as it did in in the second quarter, stockbuilds in the OECD could be muted.”The global market’s capacity to absorb barrels will be among talking points when OPEC+ nations meet to discuss supply on Sunday. Saudi Arabia wants the group to accelerate the return of another tranche of halted output adding to concerns about a surplus that would depress prices but all options are on the table.About 10% of the nation’s crude stockpiling has been directed to its strategic petroleum reserves, according to Kayrros analyst Antoine Halff. There have also been additions to the country’s refining capacity, such as CNOOC Ltd’s Daxie plant, and the addition of new tank space.It’s also possible that Beijing wants to hold more barrels in storage given the heightened levels of geopolitical risks over the last few years, the Oxford Institute for Energy Studies wrote in a note.While China’s flagship crude futures contract was flashing a softer market over recent weeks, the world’s two main benchmark’s continued to suggest relatively tight supplies.That’s because inventory builds so far this year have avoided western hubs. In Cushing, Oklahoma, the tank farm of about 15 storage terminals that underpins the West Texas Intermediate futures contract, inventories have been repeatedly near multi-year seasonal lows this year.The International Energy Agency says that in the second quarter global oil stockpiles increased by the most since the third three months of 2020, when the global economy was still being ravaged by the Covid-19 pandemic. Over that period, stockpiles in the developed world climbed by 60,000 barrels a day, while expanding by more than 1mn barrels a day everywhere else.It’s still possible that prices will need to fall from current levels for China buy in a big way, though, according to Frederic Lasserre, head of research at Gunvor Group.“The last solver that everybody is talking about is China,” he said. “Not for runs, but because we’ve seen a recent trend of them being willing to build up crude barrels. But if you expect China to go back to stockpiling 1mn barrels a day, you need a big price drop to incentivise it.”Both inside and outside of China there’s plenty of space to store unwanted oil.Bank of America Corp wrote last month that there’s about a billion barrels of empty tank capacity available across the globe to fill with inventories, which could mean that markets avoid falling into a heavily bearish structure.There are signs that the surge in production is starting to come, though. Brazil’s output approached 4mn barrels a day for the first time over the summer, and a new field is due to start in the country before the end of the year. Guyana has moved from producing nothing to almost 1mn barrels a day and output in Canada’s oil heartland of Alberta hit a record in July.At the same time, despite concerns about a decline in US output, the Energy Information Administration has consistently revised oil supply estimates higher over the last few months.What traders are waiting for now, is for those increases to appear at key storage hubs.“When we look at OECD inventories we’re still at a relatively low level,” Nadia Martin Wiggen, a director at Svelland Capital, said in a Bloomberg TV interview. “Yes, there is this supply glut coming according to expectations, but we need to see that materialising.”

Oil prices fell on Friday as traders looked toward weaker demand in the US, the world's largest oil market, and a boost in supply this autumn from OPEC and its allies. Brent crude futures for October delivery, which expired on Friday, settled at $68.12 a barrel, down 50 cents.West Texas Intermediate crude futures settled at $64.01, down 59 cents. The market was in part shifting its focus toward next week's OPEC+ meeting.Crude output has increased from OPEC+, as the group has accelerated output hikes to regain market share, raising the supply outlook and weighing on global oil prices. Meanwhile, the US summer driving season ends on Monday's Labor Day holiday, signalling the end of the highest demand period in the country, which is the largest fuel market.Crude supply increases have yet to reach the US market, raising the prospect of a tighter balance between supply and demand. Earlier in the week, prices rose on news of Ukrainian attacks against Russian oil export terminals, but reports of ceasefire discussions between Ukraine’s European allies helped ease the upward pressure.US crude inventories for the week ending August 22 posted larger-than-expected draws, suggesting late-summer demand remained firm, especially across industrial and freight-related sectors. Meanwhile, analysts noted that investors are closely watching India’s response to US pressure to curb purchases of Russian oil.GasAsian spot LNG prices slipped last week on muted demand and ample supply, with the delivery of an LNG cargo from a sanctioned Russian project adding to supply concerns. The average LNG price for October delivery into Northeast Asia was at $11.15 per mmBtu, down from $11.40 per mmBtu last week, industry sources estimated. LNG market sentiment remained calm with arbitrage for US cargoes still Europe-bound.Major Northeast Asian buyers have limited interest in prompt cargoes due to high stocks and a relatively loosened Pacific balance. The risk of Russia's Arctic LNG 2 ramping up LNG exports has significantly increased with the first unloading of a cargo from the facility in China.A full, sustained ramp-up of the first two trains at Arctic LNG 2 is a significant downside risk to Asian spot LNG prices. The Arctic LNG 2 cargo delivery has weighed on Chinese demand expectations for spot LNG, freeing up spot supply elsewhere. Additional supply from new projects is putting downward pressure on prices.Besides ramp-ups from Plaquemines in the US, new projects like LNG Canada, Greater Tortue Ahmeyim offshore West Africa and Congo LNG could add around 0.5mn tons per month in July and August, while the return of Norway's Hammerfest LNG after being offline since May represents a recovery of around 400,000 tons per month. In Europe, the Dutch TTF hub settled at $10.74 per mmBtu, recording a weekly loss of more than 6%.