Forecasts of a massive surplus in early 2026 have dominated discussion, with some projecting supply could exceed demand by several million barrels per day. Yet the market structure does not reflect that narrative. The forward curve remains backwardated several months out. While some front-end support may come from geopolitical uncertainty, a sustained backwardated structure does not point to a deeply oversupplied or slack market. It suggests conditions are firmer than headline balance estimates imply.
Spare Capacity is More Limited
The widely cited six million barrels per day of OPEC+ spare capacity was never entirely convincing. With production cuts unwound, it has become clearer which countries can actually reach their quotas. Some cannot, for technical reasons. Meaningful spare capacity is now largely concentrated in Saudi Arabia, the UAE and, to a lesser extent, Kuwait. At the same time, upstream oil and gas investment remains below pre-pandemic levels and below where it stood a decade ago. Demand is expected to continue growing, while non-OPEC+ supply growth cannot be assumed indefinitely. OPEC has established another commission to assess actual capacity levels. However measured, spare capacity is becoming an increasingly important factor for the market.