The oil market is a complex and ever-shifting landscape, and the latest report from the IEA for December 2025 reveals some intriguing trends. A global oil surplus and yet, a shortage of inventory at key pricing hubs? It's a paradox that has many scratching their heads. Let's dive in and unravel this mystery.
Despite an abundance of oil on the market, with record volumes floating on water, benchmark crude prices have only eased slightly. The North Sea Dated crude hovers around $63/bbl, while WTI sits at $59/bbl. But here's the kicker: the market's demand and supply balance trends have been influencing prices, with ICE Brent dropping by nearly $20/bbl since January.
Global oil stocks have increased by a significant 424 million barrels from January to November, averaging 1.3 million barrels per day. Crude oil on water has surged by 213 million barrels since August, with sanctioned oil struggling to find buyers. Long-haul shipments from the Americas to Asia have boosted transit volumes, and exports from the Middle East have risen due to higher quotas and seasonal demand fluctuations. China's crude stocks grew by 58 million barrels, while US gas liquids saw an increase of 63 million barrels. However, in a stark contrast, stocks of crude and refined products at key pricing hubs have barely budged.
These observed stock changes lag behind the projected surplus of nearly 2 million barrels per day for the first three quarters of the year, and an average surplus of 3.7 million barrels per day from 4Q25 to 2026. Much of this discrepancy can be attributed to the diverse dynamics in the markets for crude, NGLs, and oil products, further complicated by deteriorating market transparency.
The projected global oil surplus for 4Q25 has narrowed since the last report, as the relentless growth in global oil supply suddenly came to a halt. Global oil supply in November decreased by 610 thousand barrels per day from October and a massive 1.5 million barrels per day from September's peak. OPEC+ accounted for 80% of this decline over two months, with significant unplanned outages in Kuwait and Kazakhstan. Sanctions-hit Russia and Venezuela also saw a sharp contraction in output. Russia's oil exports fell by approximately 400 thousand barrels per day in November, reaching 6.9 million barrels per day. Urals prices plummeted to $43.52/bbl, dragging export revenues to their lowest since Russia's invasion of Ukraine in 2022. Meanwhile, Iran's oil loadings have remained steady at around 1.9 million barrels per day, but with Chinese refiners pausing purchases due to exhausted import quotas, Iranian oil on water has surged by 40 million barrels since August. For non-OPEC+ countries, the United States, Brazil, and biofuels were the primary contributors to the decline. Even so, global oil supply is still on course to increase by 3 million barrels per day in 2025 and a further 2.4 million barrels per day in 2026.
In contrast, world oil demand is forecast to increase by 830 thousand barrels per day this year and 860 thousand barrels per day in 2026. While US gas liquids demand has shown strength, it has been offset by persistent weakness in Europe and accelerated substitution away from oil in power generation in the Middle East. Refinery outages and impending EU restrictions on imports of Russian-derived products have propelled product cracks and refining margins to 3-year highs in November. Although crude and NGL markets are well-supplied, limited spare refining capacity outside of China means we could see parallel markets persist for the foreseeable future.
So, what does this all mean? The oil market's complexities are evident, and the interplay of supply, demand, and market dynamics is a delicate dance. As we navigate these uncertain times, one thing is clear: the oil market's story is far from over, and there are sure to be more twists and turns ahead. What are your thoughts on these developments? Feel free to share your insights and opinions in the comments below!
