Overview: Market Faces Highest Surplus Since Pandemic

Global oil markets are charging toward a state of vast supply excess. Eight members of Opec-plus have accelerated a tapered 2.5 million barrel per day output increase by an entire year, while Latin America is welcoming a tide of new barrels. And if Iranian and Venezuelan exports were recently thought to be in jeopardy because of US sanctions, they now seem to flow uninhibited. Consequently, markets are looking at a 1.5 million b/d surplus in the second half of the year, and the glut will grow in 2026. A surplus of this magnitude hasn’t been seen since the 2020 pandemic, and the futures market reflects this: The prices of the January 2026 and December 2026 contracts for benchmark Brent are virtually identical and at risk of flipping into contango, a sign of oversupply.