Oil Market Shows Signs of Surplus

6 November 2026

Executive Summary

New analysis from major international banks suggests that the global oil market may have returned to surplus despite continuing conflict involving Iran and disruption to Middle Eastern energy transportation.

Reuters reported on 6 November that JPMorgan estimates global oil supply exceeded demand by approximately 1.4 million barrels per day in October, compared with an estimated surplus of 1.1 million barrels per day in September.

Goldman Sachs separately estimates that global oil inventories were broadly stable during September and October, following substantial drawdowns earlier in the conflict.

These findings suggest that recovering production and weaker demand are beginning to rebalance parts of the market.

However, the assessment is not uniform across crude oil, refined petroleum products and different delivery periods. Reuters

Why is the market changing?

International energy prices have remained elevated for much of 2026, affecting industrial production, transport costs and consumer demand.

Higher prices can encourage additional production while simultaneously reducing consumption.

Reuters reported that crude and condensate exports from the Gulf averaged approximately 14 million barrels per day in October, equivalent to around 86% of pre-conflict levels, according to ship-tracking company Vortexa.

Refined petroleum product exports, however, remained substantially weaker, averaging approximately 3.1 million barrels per day, or just over half their normal volume.

This distinction is commercially important.

An improving crude oil balance does not necessarily resolve shortages or elevated prices for diesel, jet fuel and other refined products.

Contrasting market signals

The market is also displaying different pricing structures.

Some short-term Brent-linked physical-market contracts have moved into contango, where later delivery is priced above nearer delivery, suggesting improved immediate availability.

Longer-dated Brent futures continue to show backwardation, indicating that tighter near-term conditions remain relevant to market expectations.

These contrasting signals reinforce the importance of avoiding a simplistic conclusion that the energy crisis has ended.

The estimated surplus is an analyst assessment, not a confirmed restoration of normal global oil supply.

UK Impact

For British businesses, an improving crude oil supply balance could eventually ease some energy and transportation costs.

However, continued constraints on refined products may limit the benefit for road freight, aviation, agriculture and construction.

For lenders, falling commodity prices can improve the position of energy consumers while reducing revenues and collateral values for producers and commodity traders.

For insurers, changing commodity values may affect insured inventories, claims calculations and the financial resilience of counterparties.

For project sponsors, volatile energy markets continue to complicate long-term operating and financing assumptions.

Global Impact

The emergence of potential surplus conditions may alter investment decisions across the energy industry.

Oil producers could face pressure on revenues if prices weaken, while energy-importing economies may benefit from reduced costs.

Commodity-finance institutions may need to reassess collateral margins, inventory valuations and borrower liquidity.

The continued weakness in refined-product exports also creates potential exposure for businesses dependent upon diesel, aviation fuel and industrial petroleum products.

Our View

The most important development is the divergence between improving crude oil availability and continued constraints in refined petroleum markets.

For Invictus clients, energy risk should be assessed by product, geography and counterparty rather than through Brent crude prices alone.

Recommended risk mitigation measures

1. Monitor crude oil supply and demand estimates.
2. Distinguish analyst forecasts from verified inventory data.
3. Review refined-product availability separately.
4. Assess diesel and aviation fuel exposure.
5. Examine commodity price hedging arrangements.
6. Review oil producer creditworthiness.
7. Assess energy-intensive borrower financial resilience.
8. Examine inventory financing arrangements.
9. Review commodity collateral valuations.
10. Assess margin call and liquidity requirements.
11. Monitor Gulf shipping and export conditions.
12. Review marine war-risk insurance.
13. Examine trade-credit insurance arrangements.
14. Assess energy procurement contracts.
15. Review contractual pricing and adjustment provisions.
16. Examine sovereign oil-export revenue exposure.
17. Stress-test both rising and falling price scenarios.
18. Assess project-finance commodity assumptions.
19. Review supplier and customer concentration.
20. Maintain contingency arrangements for further geopolitical disruption.

Our assessment: The potential return of surplus conditions creates high commodity-market and financing uncertainty. Improved crude availability is encouraging, but refined-product constraints and continuing geopolitical risks prevent any assumption of sustained stability.

Risk Indicator: HIGH — GLOBAL OIL MARKETS, COMMODITY FINANCE, ENERGY SECURITY, REFINED PRODUCTS, MARINE INSURANCE & CREDIT RISK

Disclaimer

The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.

Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.