The international energy agency warned on Wednesday that the oil market will face a significant supply overhang next year, with global supply set to surge by 8 million bpd while demand rises by just 2 million bpd. Brent crude and U.S. West Texas Intermediate were still near three-month lows after a 5% drop on Tuesday as traders weighed that outlook against hopes of a wider flow of oil through the Strait of Hormuz.
By 1010 GMT on Wednesday, Brent crude futures were up 30 cents to $79.26 a barrel and U.S. West Texas Intermediate gained 24 cents to $76.29. Both benchmarks had hit their lowest level since early March earlier in the session, leaving the market close to a level where a bigger-than-expected supply build can feed quickly into prices.
IEA sees supply outpacing demand
The International Energy Agency said its first look at 2027 points to a market where supply growth overwhelms demand growth. The agency also said the Iran-U.S. deal should provide an opportunity to replenish depleted inventories or build new strategic reserves, linking the forecast to the possibility of more crude moving back into the market.
That backdrop is why oil traders are watching both the forecast and the diplomatic opening. A U.S. official said the interim peace deal would allow Iran to sell oil upon signing, and the memorandum of understanding extends by another 60 days a tenuous ceasefire agreed in April.
Traders weigh reopening flows
Tamas Varga, a PVM Oil analyst, said on Wednesday, "The current baseline is that the Strait of Hormuz will reopen and that ships will begin transiting through this critical chokepoint in both directions," and "The gradual resumption of oil flows, however slow, will materially affect the oil balance." Crispus Nyaga, a research analyst at Empire FX, said, "Markets may be underpricing the depth of the supply glut coming online."
Goldman Sachs lowered its Brent price forecast to $80 a barrel for the fourth quarter of 2026 from a previous $90 after the deal reduced upside tail risks to energy prices. Industry officials said a full return to pre-war production and refining levels is likely to take weeks, months or even years, which leaves the pace of any supply recovery slower than the headline diplomacy suggests.
June inventory data
U.S. crude stocks fell 8.3 million barrels in the week ended June 12, compared with market expectations for a draw of 4.6 million barrels. Official crude inventory numbers were due from the Energy Information Administration at 10:30 a.m. ET on Wednesday, giving traders another read on whether the market is already absorbing the shift that the International Energy Agency described.
For traders and refiners, the immediate read is straightforward: the market is already close to a three-month low, the IEA sees a much larger gap between supply and demand next year, and the pace of any return of Iranian barrels could help decide how quickly inventories rebuild and how far prices can stay supported.
