The global oil market is a complex and ever-evolving landscape, and the latest report from the IEA for December 2025 reveals some intriguing insights. A paradoxical situation has emerged, with a global oil surplus and yet, inventories at key pricing hubs are alarmingly low. Let's delve into this intriguing conundrum.
Despite a record amount of oil stockpiled on water, benchmark crude oil prices have only slightly eased. The North Sea Dated crude is trading around $63/bbl, while WTI hovers at $59/bbl. The market's demand and supply dynamics have undoubtedly influenced these price trends, with ICE Brent experiencing a notable drop of 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. Notably, crude oil on water has surged by 213 million barrels since August, with sanctioned oil struggling to find buyers and long-haul shipments from the Americas to Asia boosting transit volumes. Additionally, exports from OPEC+ members in the Middle East have risen due to higher quotas and seasonally weaker regional demand. China's crude stocks have increased by 58 million barrels, while US gas liquids have seen a 63 million barrel rise. However, in a stark contrast, crude and refined product stocks at key pricing hubs have only marginally increased.
These observed stock changes lag behind the nearly 2 million barrel per day build implied by our balances over the first three quarters of the year, and the average 3.7 million barrel per day surplus from 4Q25 through 2026. Much of this discrepancy can be attributed to the divergent trends in the markets for crude, NGLs, and oil products, further complicated by deteriorating market transparency.
The projected global oil surplus in 4Q25 has narrowed since the last report, as the relentless growth in global oil supply came to an unexpected halt. Global oil supply in November decreased by 610 thousand barrels per day from October and a substantial 1.5 million barrels per day from September's all-time high. OPEC+ accounted for 80% of this decline over the two-month period, with significant unplanned outages in Kuwait and Kazakhstan contributing to the drop. Meanwhile, output from sanctioned Russia and Venezuela contracted sharply. Russia's total oil exports fell by approximately 400 thousand barrels per day in November, reaching 6.9 million barrels per day, as buyers assessed the risks of more stringent sanctions. Consequently, Urals prices plummeted to $43.52/bbl, dragging export revenues to their lowest since Russia's invasion of Ukraine in 2022. Iran's oil loadings have remained steady at around 1.9 million barrels per day, but with Chinese independent 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. Nonetheless, 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 projected to increase by 830 thousand barrels per day this year and 860 thousand barrels per day in 2026. While recent strength in US gas liquids demand 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 remain well-supplied, limited spare refining capacity outside of China means we can expect parallel markets to persist for the foreseeable future.
This report highlights the intricate dynamics of the global oil market and the challenges of balancing supply and demand. It also raises questions about the impact of geopolitical events and market transparency on oil prices and inventory levels. What are your thoughts on the future of the oil market? Do you think these trends will continue, or will we see a shift in the coming months? Share your insights and let's discuss!
