Oil market balances indicate that inventories should be able to comfortably absorb a global crude supply surplus of some 500,000 barrels per day that is expected through October. But the picture is likely to change in 2026, with the market staring down a surplus averaging 1.9 million b/d next year, the latest Energy Intelligence analysis shows. By then, all planned volume increases from Opec-plus, as well as rising non-Opec-plus liquids production, will hit the market. That wave of output could mean that 850 million barrels of excess oil will need to find its way into storage in 2026 — roughly equal to the surplus caused by the Covid-19 pandemic, which required deep cuts from Opec-plus and took four long years to work off. Anticipating this scenario back in May, the forward Brent price curve moved into contango from November 2025 onward. The shift to nearer-term cargoes being priced at a discount to later deliveries — a price structure that encourages storage builds — signaled the market’s expectation of oversupply arriving by the end of the year. Fears of supply disruptions from an expanding conflict in the Middle East as well as threats of additional sanctions against Russia and Iran have since pushed the emergence of contango on the Brent forward curve out to September 2026. But as time passes without those disruptions coming to fruition, concerns about oversupply are moving back into focus. Brent’s prompt contract premium to later supply, before the contango appears, has begun to erode, while the flat price of oil has been pushed lower, with physical Brent falling below $70 per barrel this week.
