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Global oil supplies are expected to exceed demand in the fourth quarter of the year, following a recovery in Gulf exports that pushed the market into surplus in October for the first time since the outbreak of the Iran war.
The International Energy Agency (IEA), in its monthly oil market report released Friday, said increased shipments from Gulf countries had helped ease pressure on global supplies despite continued security threats in the region.
According to the Paris-based agency, Gulf oil shipments reached 18.4 million barrels per day in October. However, this remained 26% below pre-war levels.
“The oil market is showing tentative signs of rebalancing, with global oil supplies surpassing demand for the first time since the outbreak of the war in Iran,” the IEA said.
Oil prices have declined significantly in recent weeks as more vessels have resumed navigating the strategically important Strait of Hormuz, despite the security risks and attacks on tankers. Some vessels have been making the journey under US naval escort.
Strait of Hormuz Crisis Affected Global Supplies
Iran effectively closed the Strait of Hormuz during the early months of the war launched by the United States and Israel in late February.
The disruption affected one of the world’s most important oil transportation routes, creating uncertainty in international energy markets and driving prices higher.
However, global oil supplies increased by three million barrels per day in September, followed by a further increase of 2.3 million barrels per day in October, according to the IEA.
The recovery in shipments has helped restore some balance to the market, although supply conditions remain vulnerable to geopolitical developments.
Global Oil Demand Expected to Decline
The IEA expects global oil demand to fall by 2.7 million barrels per day over the course of this year.
The agency attributed the decline to oil prices remaining significantly above pre-war levels, alongside faster electrification and improvements in fuel efficiency across the global vehicle fleet.
Higher energy costs are also encouraging consumers and businesses to reduce their dependence on traditional fuels.
Diesel Prices Remain a Major Concern
Despite the improvement in overall oil supplies, diesel shortages and elevated prices continue to pose a serious challenge for global markets.
Diesel prices reached approximately $180 per barrel in October, around 77% higher than before the war.
Iranian attacks on refineries in neighbouring Gulf countries, which Tehran accused of supporting US military operations, have further disrupted refined fuel supplies.
Meanwhile, Ukrainian strikes on Russian refineries and other energy infrastructure have also affected diesel availability in international markets.
The IEA warned that tight supplies of refined petroleum products, particularly diesel, remain a major concern for consumers and the broader energy industry.
“The severe tightness in product supply, especially for diesel, remains the overriding concern of the broader market and consumers,” the agency said.
While rising oil exports have provided some relief to the global market, continued geopolitical tensions and disruptions to refinery operations could keep fuel prices under pressure.
