WTI crude oil futures rose more than two per cent to about $60.8 per barrel on Friday, extending gains for a fifth straight week supported by geopolitical and supply risks. The move followed renewed warnings from US President Donald Trump toward Iran, raising concerns over potential military action that could disrupt oil flows.
Trump said the US has an armada heading toward Iran, while US officials confirmed warships including an aircraft carrier and guided missile destroyers will arrive in the Middle East in coming days.
Supply worries were reinforced by ongoing outages in Kazakhstan, where output at the giant Tengiz oilfield has yet to resume after a shutdown earlier this week.
Also, the dollar slid toward its worst week in seven months, making crude cheaper for non-US buyers amid strained US-Europe relations and unresolved Ukraine peace talks.
However, gains remain capped by expectations of oversupply, with the IEA projecting global stockpiles to rise by 3.7 million bpd this year.
Meanwhile, the global oil market will be in deep surplus in the first quarter of 2026, the International Energy Agency (IEA) has said. It based its predictions on the excess supplies which has offset the geopolitical risk of disruption.
The IEA, which advises industrialised countries, in its monthly oil report projected global oil supply would exceed demand by 4.25 million barrels per day in the first quarter. A surplus of that size would be about four per cent of world demand and is larger than other predictions.
Oil prices have risen about six per cent since the start of the year, as concerns about geopolitics and possible oil market disruption drove buying. Global benchmark Brent was trading at $65.02 last week.
The U.S. captured Venezuelan President Nicolas Maduro at the start of the month and called on oil companies to invest in Venezuela to boost production, but in the short-term supplies from the country have been disrupted. Threats of possible U.S. strikes on Iran have also raised the prospect of reduced supplies and drone attacks and technical issues have reduced output in Kazakhstan.
“Barring any significant disruptions to supplies in Iran, Venezuela, or further cuts from other producers, a significant surplus is likely to re-emerge in the first quarter of 2026,” the IEA said. “For now, bloated balances provide some comfort to market participants and have kept prices in check.”
Supply has risen faster than demand mostly because OPEC+, or the Organisation of the Petroleum Exporting Countries plus Russia and other allies, began boosting output in April 2025 after years of cuts. Other producers, such as the U.S., Guyana, and Brazil, have also increased production.
OPEC+ has, however paused its output hikes for the first quarter of 2026. For the whole year, the market faces an implied surplus of 3.69 million bpd, the IEA’s latest figures indicated a downward revision from 3.84 million bpd in last month’s report.
In response, Ecuador’s energy minister said Colombian crude being transported on the OCP pipeline – Ecuador’s second-largest – would face ‘reciprocity’,
Helping to erode the surplus forecast, the IEA revised up its prediction for world oil demand growth by 70,000 bpd to 930,000 bpd, citing what it called a normalisation of economic conditions after last year’s tariff turmoil, and lower oil prices than a year ago.
The IEA said it is too early to assess the full implications of all the latest geopolitical developments on the oil market, but said the U.S. blockade on Venezuelan oil shipments had lowered exports by 580,000 bpd from December to early January.
The surplus will build up in the first quarter in particular as that is when global oil refiners carry out planned shutdowns and demand is lower.
“With seasonal refinery maintenance about to commence, reducing demand for crude, further reductions in crude production will be needed,” the Paris-based IEA said.
Rival forecaster OPEC expects faster demand growth than the IEA, predicting oil use will rise by 1.38 million bpd this year. OPEC’s data indicate a near balance between supply and demand in 2026, according to a Reuters calculation, rather than a surplus.
On supply, the IEA revised its global growth forecast for this year higher, to 2.5 million bpd from around 2.4 million bpd in December, saying around 52 per cent of the growth will come from outside OPEC+.
