The oil market is on track for a record surplus that could lead to a sharp drop in prices.

The International Energy Agency (IEA) predicts that oil inventories will grow by 2.96 million barrels per day in 2026, faster than the growth seen at the start of the coronavirus pandemic. Oil demand is expected to increase by just 680,000 barrels per day this year (the smallest rise since 2019), due to weak economic growth in China, India, and Brazil.

In 2026, demand growth is projected to be around 700,000 barrels per day, and demand growth will likely halt by the end of the decade. Meanwhile, oil supply is expected to increase more rapidly.

The OPEC+ oil cartel has hastened the easing of production restrictions and plans to boost quotas by 2.2 million barrels per day by September. Additionally, the forecast for production outside the cartel has been raised by 100,000 barrels per day for 2026, meaning these countries will add about one million barrels per day to the global market; the UAE has already increased its production to 3.5 million barrels per day.

Currently, Brent crude oil is around $66 per barrel (-12% since the start of the year). If current trends continue, a surplus will develop in the market, likely causing a significant decline in prices.