The International Energy Agency (IEA) anticipates a surplus of 4 million barrels per day in the oil market next year. Their forecast includes an increase in oil supply from non-OPEC+ countries by 1.2 million barrels per day, following a rise of 1.6 million barrels per day this year.

Oil demand is predicted to grow by only 700,000 barrels per day. The IEA’s calculation presumes current OPEC+ production rates are about 1 million barrels per day higher than OPEC and S&P Global Commodity Insights suggest.

Surplus Dynamics Analysis

During the coronavirus pandemic five years ago, higher surpluses also occurred but lasted only two quarters. At that time, oil prices fell, prompting OPEC+ and other producers to cut back supply, restoring market balance.

Given these dynamics, the likelihood of achieving the supply increase as forecasted by IEA appears uncertain. The projection of such a high surplus may not come to fruition as anticipated by the agency.

The International Energy Agency is forecasting a significant oil supply surplus for next year, which is creating bearish sentiment in the market. However, we believe these supply projections are overly ambitious and unlikely to actually happen. This difference in outlook presents an opportunity for traders who can see beyond the headline number.

Market Opportunities and Strategies

We are already seeing data that questions the forecast, as the Baker Hughes rig count for the week of October 17, 2025, showed a drop in active US rigs, suggesting a potential slowdown in non-OPEC+ production growth. Furthermore, recent statements from key OPEC+ members have emphasized their commitment to market stability, hinting at potential production cuts if a surplus begins to build. These factors contradict the aggressive supply growth assumptions embedded in the IEA’s model.

Looking back, we saw a similar situation five years ago during the 2020 pandemic, where a massive supply glut caused a price collapse that was quickly met with sharp production cuts from all producers. Producers are unlikely to let a surplus of that magnitude build again, making a proactive supply adjustment more probable than the IEA assumes. We also note that China’s latest import figures for September 2025 came in stronger than expected, suggesting the IEA’s demand growth estimate of just 700,000 barrels per day may be too low.

This creates an environment where market volatility is likely to rise as traders weigh the bearish IEA forecast against the more bullish reality of producer responses. Selling out-of-the-money puts on WTI or Brent crude futures for December and January expiry could be a prudent strategy. This allows traders to collect premium from the elevated fear in the market while betting that a significant price collapse will be prevented by OPEC+ action.

Alternatively, traders might consider establishing bull call spreads, which would profit from a modest price recovery while limiting downside risk. This strategy capitalizes on the idea that prices have likely overcorrected to the downside based on the IEA’s report. The key catalyst to watch in the coming weeks will be any rhetoric leading up to the next formal OPEC+ meeting in early December.

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