Strong production growth expected to increase global oil glut in 2025, 2026

(Bloomberg) – The U.S. expects bigger oil surpluses than it previously projected for this year and in 2026, driven by continued growth in American and non-OPEC production and projections that sanctions won’t likely dent Russian output.

World oil markets are expected to average a surplus of 1 million barrels a day (bpd) in 2026, the U.S. Energy Information Administration (EIA) said Tuesday, up from the 800,000 bpd surplus it projected in last month’s report. The forecast is twice as big as the glut the EIA expects this year, which also was revised up from its previous report.

Driving the projections for the gluts are forecasts that non-OPEC and U.S. oil production will be stronger than previously expected. That growing output may complicate plans by OPEC+ to bring back idled production this year, and the agency expects oil inventories to start significantly increasing if OPEC+ raises production in April 2025 as projected.

Adding to the surplus expectations, the EIA forecast that the Biden administration’s sanctions on Russian crude imposed in January won’t “significantly” affect the country’s oil production. Russian flows have only just started to show signs of slowing.

“Although the latest sanctions on Russia will slightly reduce Russia’s oil production compared with what we forecast last month, they will mostly result in shifts in global oil trade flows, which we do not forecast in our outlook,” the EIA said in its report.

Still, the agency notes the possibility of future tariffs and additional Russian sanctions are “sources of uncertainty” for oil prices.