The International Energy Agency released its February 2026 monthly oil report, projecting that global oil demand will rise more slowly than previously anticipated this year, even as prices have rallied on geopolitical tensions and supply disruptions. According to the IEA, world oil demand is set to increase by 850,000 barrels per day in 2026, down 80,000 bpd from the previous month's forecast. The agency attributed the downward revision to economic uncertainties and elevated oil prices, which are weighing on global consumption.
Despite supply outages that cut production in January, the IEA still projects a sizeable global oil surplus for 2026. The agency estimates global supply will exceed demand by 3.73 million barrels per day this year, remaining broadly unchanged from January projections. This surplus represents nearly 4% of world demand and is larger than other industry forecasts, as noted in the report.
Geopolitical challenges and weather-related disruptions significantly impacted markets in early 2026. The IEA stated that escalating tensions between the U.S. and Iran, combined with snowstorms and extreme temperatures across North America and supply disruptions in Kazakhstan, reversed market sentiment to a bullish outlook. Global oil supply plunged by 1.2 million barrels per day in January to 106.6 million bpd due to these outages.
Brent crude, the global benchmark, was trading below $70 per barrel on the day the report was published, declining after its release. Nevertheless, prices remain up approximately 14% since the beginning of the year, reflecting the impact of geopolitical tensions and production cutbacks. OPEC+ production totaled 43.3 million barrels per day of crude in January, declining 160,000 bpd from December levels.
However, this output remains substantially higher than the IEA's estimate of demand for OPEC+ crude plus inventory withdrawals, which the agency projects at 39.7 million bpd in the first quarter and 39.6 million bpd in the second quarter. On the supply side, the IEA revised its 2026 global supply growth projection downward to 2.4 million bpd from 2.5 million bpd in the previous month's report, reflecting January's production losses. Global supply growth has been driven largely by OPEC+, which began increasing output in April 2025 after years of production cuts.
Other major producers, including the United States, Guyana, and Brazil, have also lifted production during this period. A critical decision point approaches for OPEC+ members. The organization has paused output hikes for the first quarter of 2026, with eight member countries scheduled to meet on March 1 to determine whether production increases will resume in April.
This decision will significantly influence the trajectory of global oil supplies and market balance throughout 2026. Data released by OPEC on Wednesday suggested a much smaller surplus in the second quarter and potentially a supply deficit for 2026 overall should OPEC+ maintain January production levels, according to calculations performed by Reuters. The report was prepared by the International Energy Agency, which advises industrialized countries on energy policy and market developments.
Reporting was conducted by Alex Lawler with editing by David Goodman and Mark Potter, published through Reuters.
Source: energynow.com