The International Energy Agency raised its fourth-quarter 2026 oil supply forecast by 3.3 million barrels a day in its November 13 report and now expects a quarterly surplus. The upgraded outlook could reduce oil-related inflation pressure, though structural constraints continue to complicate the supply picture.
October saw global inventories rise by 52 million barrels as Gulf exports recovered faster than demand. Oil on water increased by 86 million barrels, while on-land stocks continued falling and reached their lowest level since at least 2016. OECD total stocks declined by 47 million barrels.
The composition of inventory gains presents a challenge. While the global total improved, on-land buffers remain depleted, creating vulnerability if shipping disruptions occur. The IEA warned that attacks on shipping could undermine the recovery.
Refining capacity and fuel availability remain constrained. Gulf refined-product and liquefied petroleum gas exports remain around half their pre-war levels. Attacks on Russian energy infrastructure have restricted diesel supplies, with European diesel trading near $180 a barrel at the report's writing—77% above pre-war levels—compared to North Sea Dated crude around $93. The IEA forecasts refinery runs will rebound from October's 81.3 million barrels a day to 84.7 million in December and expects emergency diesel releases to bridge the supply gap.
Broader inflation trends complicate any potential relief. The Bureau of Labor Statistics' October consumer price index showed consumer prices rising 0.4%, energy 0.7%, and prices excluding food and energy 0.3%, all on a seasonally adjusted monthly basis. The Federal Reserve held its policy-rate target at 3.75% to 4% on October 28 and said inflation remained elevated. Fed Vice Chair Philip Jefferson noted in a November 13 speech that energy costs were feeding into airfares and transportation and warned about persistent broader inflation.
Any inflation relief from cheaper oil depends on fuel reaching refineries and broader price pressures easing. Rebuilt land stocks and recovering fuel exports would support this outcome; renewed shipping disruptions or stubborn inflation could maintain pressure on financial conditions.
