Oil faces price ceiling as supply surge outpaces demand

Oil prices are set to remain under pressure in 2026 despite rising geopolitical tensions, as modest demand growth is being overwhelmed by rapid supply expansion and swelling inventories.

- Issac John [e-mail]

Oil pumpjacks are seen near Buttonwillow, Kern County, California. Global oil supply is projected to increase by around 2.5 million barrels a day in 2026 to nearly 108.7 million barrels a day.

(AFP)

The International Energy Agency (IEA) expects global oil demand to rise by about 930,000 barrels a day this year, driven almost entirely by non-OECD economies, but warned on Wednesday that production growth is running nearly three times faster creating a surplus that is likely to cap any sustained rally and keep crude trading in a volatile $60 to $70 range.

Global oil supply is projected to increase by around 2.5 million barrels a day in 2026 to nearly 108.7 million barrels a day, following a roughly 3 million barrels a day rise last year. Non-Opec+ producers are expected to account for a large share of the growth, led by the United States, Canada, Brazil, Guyana and Argentina, while Saudi Arabia has driven much of the recent Opec+ increase as earlier production cuts were unwound. “The market is entering 2026 with a significant supply buffer that reduces the risk of price spikes unless disruptions become severe and prolonged,” the IEA said in its latest assessment.