World facing a glut of oil after Iran peace deal

 Donald Trump’s peace deal with Iran could leave the world with more oil than it needs, the International Energy Agency (IEA) has forecast.

The IEA predicted that the reopening of the Strait of Hormuz would spur a “gradual” increase in supply but said demand was not expected to return to pre-conflict levels. As a result, a glut is expected by next year.

“Our first look at 2027 balances shows a significant overhang emerging next year,” the IEA said in its monthly report on the oil market.

The US and Iran are preparing to sign a preliminary deal on Friday to reopen the Strait of Hormuz and launch a 60-day ceasefire for negotiations on the Iranian nuclear programme.

That should unlock around a fifth of the world’s oil and gas supplies, which have been blocked by the closure of the strait.

The IEA expects worldwide oil demand to rise by “a relatively modest” two million barrels per day (bpd) next year, to 105 million. However, it forecasts that supply will jump by eight million bpd to 110 million.

“The war could speed up the timeline toward peak oil demand by a couple of years,” said Jason Tuvey, an analyst at Capital Economics, in a note.

“In that context, the incentives are aligning for the Gulf states to ramp up oil output sooner rather than later in order to reduce the risk of stranded assets … Oil prices could eventually end up lower than might otherwise have been the case.”

Oil was trading at close to a three-month low of $79 a barrel on Wednesday.

The rising flow of oil and falling prices are yet to hit petrol forecourts in Britain, according to FairFuelUK. Howard Cox, the campaign group’s founder, said that while Brent crude prices had dropped 11pc in the past four days, retail pump prices had fallen “a measly” 2pc.

“The fuel supply chain is again holding back on passing on wholesale price cuts to drivers,” Mr Cox said.

The IEA said this oversupply could help countries replenish their depleted oil stockpiles. Many countries have been running down their emergency oil reserves during the war in Iran.

The agency said stocks of crude oil and refined products such as petrol, diesel and jet fuel had shrunk by an average of 3.8 million barrels a day since the conflict began at the end of February, accelerating to 4.6 million barrels a day in May.

This helped keep oil prices from soaring even higher but stockpiles are now dangerously low.

Among the 38 wealthier countries in the Organisation for Economic Cooperation and Development, stockpiles are at their lowest level since 1990, according to the IEA.

“Further declines in the coming months could still take global oil stocks to historic lows before the market balance shifts to surplus,” the IEA warned.

Experts have warned that it will take time for shipping companies to get tankers to the region to restart shipments and for refiners to restart their plants.

“While the US‑Iran interim agreement paves the way for a rebound in Middle East exports, operational and political constraints, including prolonged demining and unresolved transit arrangements, leave downside risks to the outlook,” the IEA said.