- Analysts project a significant oil surplus next year, with estimates ranging from 1.7 mbd to over 3 mbd.
- OPEC+ supply growth, limited demand expansion, and non-OPEC+ output increases are driving the imbalance.
- China’s stockpiling and geopolitical factors are temporarily supporting prices, but long-term risks remain.
Multiple forecasts suggest the oil market is heading into a major glut. The IEA projects an oversupply of 3.3 mbd in 2026, while the EIA sees 1.7 mbd. Macquarie estimates around 3 mbd of surplus in late 2025 and early 2026, and Rystad expects 2.2 mbd. If accurate, prices could drop sharply, potentially hitting $50 a barrel or lower, according to Gibson.
Drivers of the Glut
OPEC+ has completed unwinding its first round of cuts of about 2.2 mbd, and a second tranche of 1.65 mbd is being released earlier than planned. Meanwhile, non-OPEC+ supply is projected to rise by 1.4 mbd this year and 1 mbd in 2026, mainly from the Americas. On the demand side, growth remains muted — just 740 kbd in 2025 and 700 kbd in 2026, according to the IEA, with Rystad and the EIA offering slightly stronger estimates of around 1.05 mbd.
Despite the looming surplus, oil benchmarks remain well above pandemic lows, and the futures curve is still in backwardation. China is a key factor. The IEA reports Chinese stockpiling peaked at 0.9 mbd in Q2 2025, with new storage capacity under construction. This suggests Beijing will continue building reserves in 2026.
Geopolitical Factors
China’s crude imports heavily involve sanctioned producers — 27% came from Iran, Russia, and Venezuela last year. Growing Western sanctions, including the EU’s 19th package targeting Russian flows and US tariff hikes on Indian goods linked to Russian crude purchases, provide China with incentives to keep building inventories.
Other Destocking Options
If a glut materialises, inventories could rise elsewhere. The US may seek to refill its Strategic Petroleum Reserve, currently well below pre-2022 levels. Low prices could also spur higher refining runs, increasing product stocks, while floating storage is an option, though costly due to high VLCC rates.
Long-Term Risks
Stockpiling cannot last indefinitely. Should oversupply persist, producers may be forced into new output cuts, which could negatively impact tanker demand.
Crude Tanker Market Updates
Middle East
VLCCs: Market steady around WS100 for TD3C and WS58 for AG/West, supported by 2nd-decade activity.
Suezmaxes: Stable at 140 x WS65 via C/C, though East runs have softened below 130 x WS137.5.
West Africa
VLCCs: Activity muted, WAF/East holding around WS92.
Suezmaxes: Rates dropped to 130 x WS107.5 due to a long tonnage list; eastbound premium ~10 points.
Mediterranean
Suezmaxes: Stable at 135 x WS142.5, Libya/Ningbo est. $5.2m.
Aframaxes: Steady in low WS140s for Ceyhan and WS150s for Libya; CPC at WS160.
US Gulf/Latin America
VLCCs: Activity subdued, USG/East down to $11.25m; Brazil/East at WS90.
North Sea
Aframaxes: Rates around WS130–135, sentiment steady with local owners dominating fixtures.
Clean Products
East: LR2s bottomed at WS110–115 but showing signs of recovery; LR1s softer at WS125. MRs rebounded to 35 x WS175.
UK Continent: MR activity lifted rates slightly; refinery restarts may add momentum.
Med: MR rates corrected to 37 x WS120; Handies strong at 30 x WS180 on tight tonnage.
Dirty Products
Handies: UKC firming towards WS225; Med rebounded to WS190.
MRs: Scarce availability, expected around WS160–165 in UKC and WS150 in Med.
Panamaxes: Quiet, flat at WS115 UKC-USG and trending WS145 on TD21.
Rates & Bunkers (Sep 25, 2025)
TD3C VLCC AG-China: WS101 (-5) / $94,500 TCE
TD20 Suezmax WAF-UKC: WS111 (-5) / $47,500 TCE
TD25 Aframax USG-UKC: WS165 (+4) / $41,000 TCE
TC1 LR2 AG-Japan: WS112 (-7) / $23,500 TCE
TC18 MR USG-Brazil: WS219 (+26) / $29,250 TCE
Rotterdam VLSFO: $455 (-6) | Singapore VLSFO: $486 (+6) | Fujairah VLSFO: $482 (-2)
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Source: Gibson
