The best place to observe the shift taking place in global oil markets is at sea.
More than 1 billion barrels have been amassed on the world’s tanker fleet, according to consultant Vortexa Ltd. It’s the biggest flotilla of oil on the water since 2020, when a price war between Saudi Arabia and Russia flooded the market during the Covid-19 pandemic.
The phenomenon gives tangible support to long-held predictions that surging production will push the market into surplus. While China has kept the excess hidden for months by scooping up cheap barrels for its strategic reserves, the market finally seems to have reached a tipping point.
Crude cargoes from the Middle East are starting to go unsold and key price gauges signal that supply scarcity is ending. International oil futures have sunk to a five-month low near $60 a barrel and top traders are braced for a further slide.
“For the last 12 months we’ve all known that there’s this surplus that’s coming,” Ben Luckock, global head of oil at Trafigura Group, said at the Energy Intelligence Forum in London this week. “I think it really is just about here now.”
The transition to oil supply abundance should offer relief to consumers after years of price inflation, and fulfill President Donald Trump’s unceasing desire for cheaper gasoline. But it poses a threat for US shale drillers already fretting over the industry’s future, and for the kingdom of Saudi Arabia as it grapples with a soaring budget deficit.
The International Energy Agency — a Paris-based forecaster that’s a benchmark for the oil industry — has been predicting a flood of supplies for more than a year. Additional barrels from the US, Brazil, Canada and Guyana were seen overwhelming growth in demand, which has been slowing as China adopts electric vehicles.
The scale of the projected oversupply started to swell in April, when Saudi Arabia and its partners in the Organization of the Petroleum Exporting Countries said they would begin reviving idle oil production far faster than scheduled. Riyadh’s objective, officials say privately, was to recoup its lost share of world markets.
World inventories have been accumulating at a rate of 1.9 million barrels a day so far this year, according to the IEA. The surge in barrels at sea could be the precursor to an even bigger buildup in 2026.
“That is in large part due to the accelerated unwinding of extra voluntary production cuts agreed in 2023 by eight OPEC+ countries. The outlook for non-OPEC+ supply growth has also marginally increased,” IEA Head of Oil Industry and Markets Toril Bosoni said in a commentary on the agency’s website. “Those hefty increases are set against a backdrop of tepid demand growth.”
Other prominent forecasters also anticipate a surplus next year, although their projections are less extreme. JPMorgan Chase & Co. sees an average daily overhang of 2.3 million barrels in 2026, while the US government’s Energy Information Administration predicts 2.06 million.
Yet crude prices haven’t been at levels that would indicate a glut. They initially faltered after OPEC+ opened the taps in April, but proved surprisingly resilient for much of the year. Between January and the end of September, Brent futures averaged $70 per barrel.
The prevailing view today is that China’s stockpiling binge diverted supplies away from major western storage hubs, such as Cushing in Oklahoma, where weekly data disclosures have a greater influence on prices. Geopolitical risks like Trump’s strike on Iran’s nuclear facilities also lent support.
“The reality of the market is that we haven’t built any stock in western market centers — the excess has ended up predominantly in China,” said Russell Hardy, chief executive officer of Vitol Group, the world’s top independent oil trader. But “more supply has hit the market in the second half because OPEC has steadily increased.”
That’s becoming a problem. Middle Eastern exporters such as the United Arab Emirates and Qatar struggled to sell cargoes for loading in November. Some shipments from the region have only just found buyers, later than normal, while a few others remain unsold.
The clearest shift has been in the price curve — an array of contracts that show how much traders have to pay to secure crude supplies for each month in the future. Back in April, it was most expensive to guarantee supplies for next-month delivery, a structure known as backwardation that indicates supply scarcity.
That premium has disappeared, with much of the curve now showing the opposite pattern known as contango, a sign of abundant supply where immediate delivery of crude is cheaper.
The consequences of this switch are evident in the world’s biggest oil consumer. US crude stockpiles have climbed for three straight weeks to the highest seasonal level since 2023. One storage broker reported a surge in bids for securing tank capacity for January at Cushing, a sign that traders are positioning themselves for a glut.
On its current trajectory the world is on course for a record-breaking glut of almost 4 million barrels a day next year, according to the IEA. But history has showed that the oil market is capable of rapidly changing course, and some key players are skeptical that the surplus will be quite so big.
The Energy Information Administration sees the rapid growth in US crude production coming to an end next year as prices at current levels are curbing drilling. The country could see its first annual output drop since 2021.
Recent monthly supply increases by OPEC+ have fallen short of the advertised volumes as many members struggle to pump more. If the market does slump, some forecasters such as Morgan Stanley say the group may reverse course and reduce output. Trump’s squeeze on India’s purchases of Russian crude while he seeks an end to the war in Ukraine may also tighten the market.
Trading giants including Gunvor Group and Vitol anticipate a short-term price slide, with Trafigura predicting crude in the $50s next year, but they also expect the market to recover into the mid-$60s within about 12 months.
The prevailing narrative is “setting up this bearish kind of view of the world,” said Ryan Lance, chief executive officer of ConocoPhillips Inc. “But then again, you look at the physicals, you look at the physical market that’s happening today, and you don’t see that playing itself out.”
Even if the actual surplus doesn’t live up to the dizzying projections seen on paper — something even the IEA’s Bosoni says is likely as the market adjusts — the current shift is undeniable.
“We are now moving into a bit of a different market,” Torbjorn Tornqvist, CEO of trading giant Gunvor Group Ltd., said in an interview. “We have heard it before and people have been burned on that. But this time around, at this stage, I think there’s a bit more substance in the oversupplied narrative.”
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