Every cycle produces its own comforting myth, for 2026, that is the “inevitable oil glut.” The reasoning behind that is mainly that crude oil producers are pumping more, Iran is still exporting despite sanctions pressure, and the market expects OPEC+ to edge toward output hikes. The current story in the market still is that surplus is building and prices must eventually fall. When, however, looking at the physical market, the latter is bluntly refusing the script. There are no real signs, at least for a longer period, that the tanks are overflowing, while floating storage is not exploding. We also see that OPEC+ is not inclined at all to open the taps recklessly, while tanker freight is behaving as if supply security, not oversupply as most have been expecting, is the dominant theme. It seems that the only place where a glut appears in 2026 is in spreadsheets.
To be clear, a real crude oil glut has a signature: it shows up in relentlessly rising OECD inventories. At the same time, the signature also includes a forward curve that collapses into deep contango, with producers (especially OPEC+ producers) slashing official selling prices to clear unwanted barrels. Another main signal will be tankers idling because cargoes have nowhere to go. These signals have been clearly seen in 2015–16 or 2020. The present market does not look like either.
Still, most institutional forecasts continue to project that supply growth will exceed demand growth in 2026. The OECD energy watchdog in Paris, the International Energy Agency (IEA), keeps stating that global oil demand will rise by 850,000 bpd in 2026, while, according to the Paris analysts, world oil supply will increase by about 2.4 million bpd to 108.6 million bpd. This would clearly indicate a surplus. The US Energy Information Administration (EIA) reports that global inventory builds are expected to average more than 3 million bpd this year. This should be, at least on paper, decisive. These barrels should appear in accessible storage in a consistent, sustained fashion before the word “glut” earns credibility.
Related: Oil Prices Surge 3.7% as U.S.-Iran Standoff Triggers Higher 2026 Forecasts
Looking at the real figures, this credibility is not to be found. Inventory data tell a more ambiguous story, as U.S. weekly figures have swung sharply. Yes, one recent week saw a massive crude build of around 16 million barrels, the largest in three years. But at the same time, another weekly report showed a 9-million-barrel draw, indicating even lower gasoline and distillate stocks. Again, this volatility, showing no clear direction, is not the pattern of a market drowning in supply. The only signs we are currently seeing are the pattern of a system where refinery runs, import timing, and weather interact with tight logistics. It should also be noted that OECD stocks have not surged at all, as you would see in a structural demand glut. US bank Goldman Sachs has recently increased its late-2026 price forecasts, citing lower-than-expected OECD inventories. A real assessment at present should be pushing the theory that “a surplus that fails to materialize in storage is not a surplus!” The latter is just a forecast awaiting validation.
When talking about a glut, floating storage offers another reality check. In a normal situation, when the market cannot absorb crude, it reacts by storing barrels of oil on water. In previous gluts, crude oil tankers became de facto storage tanks. They were showing crude anchored offshore in visible distress. At present, global oil-on-water is not spiraling. Current estimates indicate that around 900 million barrels of oil are on water globally, down from recent peaks. They are clearly not climbing toward crisis levels. In a real glut scenario, with the world choking on unwanted barrels, these numbers would be moving decisively higher. It is not. The current moves by Saudi Arabia, Iran, and other Gulf-based exporters should also not be seen as a glut issue; they are clearly mitigating the risk of a US military action against Iran.
Looking at OPEC+’s behavior, it provides an even clearer signal. As history or real market signals would have shown, if these crude oil producers truly believed a glut was inevitable, they would have changed their current strategies to defend market share. The contrary is even happening; OPEC+ is moving in increments. The group at present is still considering a possible 137,000 bpd increase in output for April. This is not flood-the-market behavior, but just cautious calibration. The fact that Saudi Arabia boosted exports in February should be clearly recognized as a contingency measure amid fears of a potential U.S. strike on Iran. This is a clear and functional front-loading of shipments to reduce disruption risk. Any analysis shows that this crisis management (Iran/Hormuz) is not at all linked to oversupply panic. The group is keeping spare capacity as a lever, not abandoning it.
Signs from the freight market only reinforce this interpretation. Macro narratives rarely fool tanker rates, as they normally respond to physical flows and perceived risk. Yes, the last few weeks’ VLCC time charter equivalent earnings on Middle East–Asia routes have surged above $200,000 per day, a dramatic increase from levels at the start of the year. At the same time, the Baltic Exchange’s dirty tanker index has also climbed sharply over the past eight months. All of this is linked to an intensification of Iran risks, which could push rates to the decade’s highest levels. Now, take the birds’ view of this market; freight spikes of that magnitude are not a hallmark of complacent surplus. The real signals from these tanker rates reflect precautionary bookings, higher war-risk premia, and mostly Gulf exporters moving barrels early to avoid potential chokepoints.
High freight rates are also a tightening mechanism, as when rates double or triple, the cost of delivered crude will increase. Arbitrage windows narrow, while at the same time, some marginal flows will be uneconomic. The result is friction, which converts theoretical supply into delayed or rerouted supply. It needs to be recognized that a true glut requires frictionless placement of excess barrels. For 2026, there is clearly no frictionless situation; friction is more than abundant.
In this current fragility, the Iran variable plays a pivotal role. At present, around a third of OPEC+’s output is constrained by sanctions, military threats, or political volatility. Prices reflect the system’s limited tolerance for shocks. Even in a situation where tensions escalate or even explode around the Strait of Hormuz, the direct result will be a sharp overnight decline in effective tanker capacity as ships avoid high-risk waters or insurers reprice exposure. This situation will certainly drive freight even higher, while also tightening prompt supply. This will be the case even when nominal production levels hold steady. Again, a global glut cannot coexist with such structural vulnerability without problems.
Global upstream investment, or, more explicitly, its lack, adds another layer. Analysis shows that global upstream oil and gas investment is projected to be just below $570 billion in 2026, marking another decline compared with 2025. At the same time, of the total upstream investment, around 40% is spent to offset the natural decline in existing fields. These figures do not show any exuberant overbuilding. As some have already stated, the current investment levels are just the bare minimum required to keep output flat in a world of mature basins. Financial advisers and even traders should realize that decline rates are relentless. Without sustained new project sanctioning, supply growth assumptions could be based on dreams rather than reality, while they are already sensitive to delays, cost overruns, or geopolitical setbacks.
The 2026 “Oil Glut” story has also been supported by demand-side pessimists. Total figures show that demand is more resilient than most expected. Global oil consumption continues to expand outside OECD regions, driven by petrochemicals and aviation. At the same time, crude oil prices are sustained even amid modest demand growth in a system constrained by investment and geopolitical risk. The bull case does not require booming consumption; it just needs global demand to stay at a level that is “good enough” in a market without a cushion.
The notion of cushion is critical. When there is a genuine glut, the market will shrug off risk. Looking at the market in 2026, this is not the case, as prices respond quickly to geopolitical headlines. OPEC+ statements move benchmarks, and scrutinizing tanker routes has become a daily business. Again, these moves or indicators do not show the psychology of abundance.
Still, criticism of all of this will be there, as proponents of the glut narrative will again argue that non-OPEC supply growth, particularly from the United States and Brazil, will swamp demand. This is a big, however. When looking at shale growth in the USA, it is no longer unconstrained. Expansion has been clearly constrained lately by capital discipline and cost inflation. Brazil’s offshore developments will add barrels, but not at the expected levels, which will guarantee structural oversupply, especially amid geopolitical uncertainty. And the unnamed Dark Horse, or the Country Not To Be Named, Russia, is looking at flows that are entangled in sanctions, shadow fleets, and rerouting costs. It has even become worse for Moscow, as Ukraine has become extremely effective in hitting upstream, midstream, and downstream assets inside of Russia, most forcing Putin’s oil to close production overall.
There are even other factors complicating the picture, such as quality and refining capacity. Crude oil volumes currently misrepresent the true picture, as a surplus of one grade does not equate to a universal glut. Sweet–sour differentials, refinery configurations, and regional demand patterns can produce local tightness even when aggregate numbers suggest comfort. Media and financials should again understand that a glut, based on volumes or quality that cannot be processed efficiently, is not an economic glut; it is just a mismatch.
The above is clearly shown in the freight market. Increased Middle Eastern export programs increase ton-miles while tightening ship availability, even if absolute production increases. This effect is even amplified by precautionary bookings ahead of potential disruptions. Increased freight inflation has already become an additional tax on global supply chains, reinforcing the idea that the system is operating with limited slack.
Still, none of this guarantees a roaring bull market, as crude oil rarely moves in straight lines. Demand could still be softened by a slowdown of global economic growth or a decisive diplomatic breakthrough with Iran, which would decrease risk premia. It is also not totally out of this world to admit that OPEC+ could misjudge the balance and overshoot. Still, when looking at the complacent narrative of inevitable glut, it should be admitted that it remains very difficult to reconcile with the evidence. Floating storage is not exploding, and inventories are not persistently ballooning. OPEC+ member countries are not at all in a panic, and freight is not collapsing. Geopolitical risks are not fading in the coming months or even years, while upstream investment is not surging. These factors don’t describe a market drowning in crude. The only thing that all are describing is a market that could tighten rapidly if one variable shifts.
The main danger for policymakers, industry, and consumers is not an underestimation of a surplus but an underestimation of fragility. A global market built on thin spare capacity, low or even fragile investment, and geopolitical fault lines will become bullish not by a major shock, but by the absence of a cushion.
The “oil glut” of 2026 could continue to appear in modelling exercises. Reality, however, is that markets clear in tank farms and on tanker decks, not in spreadsheets. In physical arenas at present, abundance is still conspicuously absent.
By Cyril Widdershoven for Oilprice.com
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