New Delhi: Global crude oil market is expected to tighten this year before supplies turn into a surplus in 2027, as the US and Iran move towards a peace deal in West Asia that could reopen the crucial Strait of Hormuz.
Global crude oil supply is set to fall by 3.9 million barrels per day (bpd) to 102.4 million bpd this year amid trade disruptions due to the West Asia war, before rebounding by 8 million bpd next year, the (IEA) said on Wednesday.
An oversupply is expected in 2027 as global oil demand is projected to rise by a relatively modest 2 million bpd to 105.3 million bpd, IEA said in its monthly oil market outlook for June 2026 released on Wednesday.
“Our first look at 2027 balances shows a significant overhang emerging next year. Global oil demand is projected to rise by a relatively modest 2 mb/d to 105.3 mb/d. By contrast, oil supplies look set to surge by around 8 mb/d to 110 mb/d,” the Paris-based organization said, adding that the surplus may provide a respite to the market and an opportunity to replenish depleted inventories, as countries review their energy strategies and policies in response to the .
Oil demand is estimated to decline by 1.1 million bpd on a year-on-year basis in 2026.
Rebound expected
A rebound of 2 million bpd is expected in 2027, as a normalisation of trade flows, lower oil prices and an improving economic outlook contribute to the recovery, it said.
IEA noted that while the US‑Iran interim agreement paves the way for a rebound in West Asian exports, operational and political constraints, including prolonged demining and unresolved transit arrangements still remain a concern.
On the proposed Iran-US peace deal, IEA said that the interim agreement to end the war could pave the way for a reopening of the Strait of Hormuz and a lifting of a US blockade on Iranian oil traffic. The two nations are likely to sign a deal to end the war on Friday in Switzerland.
The biggest breakthrough in negotiations since the start of the conflict sent oil prices tumbling to their lowest levels since early March, it said.
has reached three-month low levels of about $79 per barrel before recovering from the lows. Around 8 PM, the August Brent contract of the Intercontinental Exchange traded at $80.67 per barrel, 2.17% from its previous close. The July contract of West Texas Intermediate on the NYMEX rose 2.25% to $77.76 per barrel.
Already retreated
Prices had already retreated from recent highs as market tensions eased on a surge in Gulf exports at the start of June, an acceleration in IEA government stock releases and weaker demand.
Mint earlier reported that oil prices may not decline much from current levels, and could even edge up modestly as importing nations rush to replenish their strategic reserves once the Strait of Hormuz opens up after the US-Iran deal.
“If the deal holds, exports and production from the Gulf should see a gradual recovery – not least because Iranian oil exports can fully resume once the US blockade is lifted. Shipments through the Strait were already rising sharply in early June, supported by ship-to-ship transfers in the Gulf of Oman, lifting total flows from a May low of 9.6 mb/d to around 12 mb/d,” IEA said.
IEA noted that a full recovery will not be immediate, however, as landmines will have to be removed from the main shipping lanes and supply chains will take time to normalise.
Resumption of oil supplies is significant for India, which imports 90% of its needs and spends about $123 billion annually.