IEA and ITR Economics Signal Divergent Oil & Gas Outlooks for 2026

Record Oil Glut Predicted by IEA

According to the International Energy Agency (IEA), the world is heading toward a record-breaking oil surplus in 2026. The agency projects that global supply will exceed demand by nearly 4 million barrels per day, the largest annual overhang ever recorded. This marks an 18% upward revision from its previous estimate, signaling accelerating output from both OPEC+ nations and non-OPEC producers like the U.S., Brazil, Canada, Guyana, and Argentina.

While inventories have been rising at a pace of 1.9 million barrels per day in 2025, much of that surplus had been absorbed by Chinese stockpiling, which helped stabilize prices temporarily. However, with Middle Eastern exports surging, crude on the water has reached its highest level in years, suggesting that onshore stocks will soon swell. The IEA forecasts global oil demand growth to slow to just 700,000 barrels per day in both 2025 and 2026, constrained by tariffs, slowing economies, and the shift toward electric vehicles.

As a result, prices have softened, with Brent crude trading near $63 per barrel—down 15% year-to-date. While major financial institutions like Goldman Sachs and JPMorgan predict continued weakness, the IEA notes that much of the oversupply is in natural gas liquids (NGLs) rather than crude, slightly softening the blow. Still, the agency warns that crude stockpiles could surge as these volumes move onshore, placing further downward pressure on prices.

ITR Economics Offers a More Optimistic Medium-Term View

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In contrast, ITR Economics presents a more measured and optimistic forecast for the oil and gas sector heading into 2026. Their analysis, drawn from recent EIA and Baker Hughes data, identifies that the market is currently in Phase C (Slowing Growth) but approaching a Phase A Recovery.

Key takeaways from ITR’s October 2025 outlook include:

• Oil prices remain soft but are forecasted to rise gradually through 2026, with quarterly estimates climbing from $63.57 in Q3 2025 to $70.37 by Q2 2026
• Rig counts are expected to improve in the back half of 2026, driven by stronger global industrial activity and U.S. GDP growth.
• Extraction remains at record highs, but drilling and exploration are still subdued, leaving room for capacity expansion as prices recover.
• Upstream investment remains below pre-2015 levels, meaning the sector is not in an overbuilt condition, unlike during previous oil booms.

ITR notes that while oil prices are above breakeven for most existing wells, they remain too close for comfort on new projects…delaying major investment until prices stabilize in the $70s per barrel range. However, the firm expects this rebound to occur sooner than the industry anticipates, as global industrial output and trade conditions improve in 2026.