IEA Forecasts Massive Oil Surplus in 2027 after Hormuz Recovery

• The International Energy Agency (IEA) is forecasting a significant oil supply surplus in 2027, as Middle East production recovers from the disruption caused by the closure of the Strait of Hormuz. Global supply is expected to outpace demand by more than 5 million barrels per day (bpd), marking a sharp shift from the current period of market tightness.
• According to the IEA’s June oil market report, global oil consumption is expected to reach 105.3 million bpd in 2027, representing a gain of 2 million bpd. However, output is projected to climb by roughly 8 million bpd to 110 million bpd, creating a sizeable surplus that could provide a “welcome respite” to the market.
• The IEA noted that the expected surplus could allow countries to replenish depleted inventories or build new strategic reserves, particularly as governments review their energy strategies and policies in response to the crisis. This follows a period in which inventories have been under severe pressure, with the Organisation for Economic Co-operation and Development (OECD) government inventories falling to their lowest level since December 1990.
• The forecast comes after an interim agreement between the U.S. and Iran, scheduled to be signed on June 19, 2026 in Switzerland, paved the way for the reopening of the Strait of Hormuz and the lifting of the U.S. naval blockade on Iranian oil. However, the IEA warned that operational and political hurdles, including the time needed to clear mines and disputes over transit rights, could slow the pace at which Middle East output returns.
• Before the 2027 surplus materialises, the market is expected to face further strain. Global supply is set to fall by 3.9 million bpd in 2026 to 102.4 million bpd, while observed inventories have been draining at an average of 3.8 million bpd since fighting broke out on February 28. In May alone, inventories recorded a single-month draw of 143 million barrels.
• Oil prices have also eased sharply from crisis levels, with North Sea Dated crude prices falling by more than $40 per barrel from May through mid-June to around $82 per barrel, while Brent futures traded around $79 per barrel. The decline suggests markets are beginning to price in the expected recovery in Middle East supply, although near-term inventory risks remain elevated.

(Source: Yahoo Finance)