The global oil market faces an “untenable” surplus of about 3 million barrels a day, testing how much can be absorbed by China’s recent stockpiling drive, a major forecasting agency has warned.
In its monthly oil market report on Thursday, the International Energy Agency boosted estimates for global oil demand this year and next, but raised supply projections even more. Output will exceed consumption by an average of 3.33 million barrels a day in 2026, about 360,000 a day more than anticipated a month ago.
The market has so far absorbed OPEC output additions, with stockpiles in countries of the Organisation for Economic Co-operation and Development still tight, Toril Bosoni, head of oil markets at the IEA, told Bloomberg Television. But demand growth and the strength of stockpiling in consuming countries will determine balances, ultimately.
“The oil surplus that we are seeing in our balances of 3 million barrels a day, it’s untenable, there isn’t the capacity or the ability for the market to absorb such an increase,” Bosoni cautioned.
“We saw from February to August this year, about 100 million barrels of crude oil being absorbed by China. If they continued to purchase oil at the current rate, that would help absorb some of the surplus but it would be nowhere near the 3 million barrels a day that we are projecting.
“So there will have to be some adjustments on the supply or demand side to make the market rebalance.”
The Paris-based adviser to major economies cautioned that China’s “breakneck” pace of vehicle electrification will be a “fierce headwind” for gasoline consumption, with EVs accounting for more than half of car sales in July.
The US Energy Information Administration voiced similar concerns, saying it expects global inventory builds to average more than 2 million barrels a day from this quarter through to the first three months of 2026.
Producers continue to take a more optimistic view, with the Organization of the Petroleum Exporting Countries projecting a substantial supply deficit this year and next even as the group revives production, a view that’s at odds with much of the wider industry. The cartel projects that world oil consumption will climb by a healthy 1.3 million barrels a day this year.
Still, the supply additions flagged by OPEC may not materialize in their entirety, and some analysts have suggested that the market can absorb barrels by filling up tanks that are sitting empty across the world.
And the scale of China’s stockpile building remains something of an unknown, with inventories a tightly held state secret. The Asian nation is expected to keep stockpiling crude at an accelerated rate this year and throughout 2026 — adding 500,000 barrels a day to its inventories over the next five quarters — as lower prices and the focus on energy security drive a buying spree, according to Goldman Sachs Group Inc.
This story was produced with the assistance of Bloomberg Automation.
With assistance from Julian Lee, Prejula Prem and Francine Lacqua.
This article was generated from an automated news agency feed without modifications to text.
