The International Energy Agency (IEA) has projected that the global oil market could enter a significant oil supply surplus in 2027 as production rebounds following the recovery of the Strait of Hormuz, one of the world’s most strategically important energy corridors. The agency’s latest monthly oil market report suggests that improving Middle East oil exports, combined with slower growth in global demand, could reshape energy markets over the next two years.
According to the International Energy Agency, the projected IEA oil surplus would emerge after supply expands by approximately 8 million barrels per day (bpd) while worldwide oil demand increases by only 2 million bpd in 2027. The forecast comes as the United States and Iran move toward implementing an interim agreement that includes reopening the Strait of Hormuz and lifting the United States naval blockade on Iranian exports.
The anticipated Strait Hormuz recovery is expected to restore one of the world’s busiest oil shipping routes after months of disruption that severely affected global energy supplies.
IEA oil surplus driven by recovering Middle East oil production
The International Energy Agency said the closure of the Strait of Hormuz during the Iran conflict blocked more than 14 million barrels per day of Middle East oil production, making it one of the largest oil supply disruptions in modern history.
Following the interim diplomatic agreement, the agency expects Gulf oil production and exports to recover gradually. The International Energy Agency indicated that Iranian crude exports could fully resume once restrictions imposed by the United States naval blockade are removed.
The IEA oil surplus forecast reflects expectations that additional production from Gulf producers will combine with increasing output from other regions to create substantially higher global supplies than anticipated demand.
Energy analysts note that a sustained recovery in Middle East oil exports could ease supply concerns that have dominated markets throughout the conflict while improving stability across international energy trade.
Strait Hormuz recovery already improving global oil flows
The report indicates that the Strait Hormuz recovery was already underway by early June as ship-to-ship transfers increased in the Gulf of Oman. These operations helped lift total Middle East oil flows to approximately 12 million barrels per day from a low of around 9.6 million barrels per day recorded during May.
Although the recovery has progressed faster than many analysts expected, the International Energy Agency cautioned that several risks remain. Political uncertainty, prolonged demining operations, and unresolved transit arrangements could slow the full restoration of commercial shipping through the Strait of Hormuz.
Experts say that while the Strait Hormuz recovery represents an encouraging development, geopolitical conditions across the region will continue to influence both shipping activity and oil market confidence.
Global oil market faces changing supply and demand dynamics
Beyond the recovery in Gulf exports, the International Energy Agency expects broader structural changes to shape the global oil market over the coming years.
The agency forecasts that worldwide oil production will decline by approximately 3.9 million barrels per day during 2026 as Middle East production losses outweigh higher output from producers in the Americas. However, as regional exports recover and production capacity returns, the market is expected to transition toward a sizeable oil supply surplus in 2027.
Meanwhile, Russian crude oil and refined fuel exports remained broadly stable at approximately 7.4 million barrels per day during May despite continued operational challenges linked to Ukrainian drone attacks on refinery infrastructure.
According to energy economists, the combination of recovering Middle East oil production, resilient Russian exports, and expanding non-OPEC supply may contribute to greater competition among producers if demand growth remains relatively modest.