Rising oil-on-water volumes are the latest red flag for oil markets. Since September, the amount of oil stored at sea has surged, reviving comparisons with the 2020 coronavirus crisis and leading to concerns that demand is weakening.
However, that interpretation fails to capture the full picture. Today’s oil-on-water build is more nuanced and reflects a story of logistical bottlenecks, refinery constraints, and structural shifts in global oil flows.
Since early September, an additional 215 million barrels of crude have accumulated on the water, lifting crude oil-on-water volumes by roughly 19 per cent, according to analysts at Kpler. Total oil-on-water now stands at around 1.3 billion barrels. While the surplus is becoming more visible, it remains manageable. Unlike in 2020, when oil flooded storage due to a demand collapse, today’s build-up is occurring against a backdrop of healthy product demand and strong refining margins. Pricing dynamics, including discounts on crude, are also likely to stimulate additional buying, particularly from India and China.
Looking at the full picture is critical. Combined crude and product volumes on water have risen by about 164 million barrels, or 13 per cent, since September. Beneath that headline figure, however, lies a sharp divergence. Crude inventories at sea are rising, while products-on-water have declined by roughly 62 million barrels, or 10 per cent, over the same period. This reflects tight product markets, partly driven by Ukrainian drone attacks that have disrupted Russian refinery operations and reduced product exports.
A market suffering weak demand would result in both crude and products backing up. Instead, the data points to a loose crude market alongside a tight products market, a classic signal of insufficient processing capacity rather than faltering demand.
Kpler estimates that the additional 215 million barrels of crude-on-water are split fairly evenly across three sources: sanctioned exporters such as Iran, Russia, and Venezuela; Opec+ producers (excluding sanctioned barrels); and large non-Opec+ producers in the Atlantic Basin.
Part of the build-up reflects temporary refinery disruptions. Seasonal maintenance and reduced refinery runs account for roughly 15 million barrels, or about 7 per cent of the total build, according to Kpler.
Maintenance has been heavier than usual in Asia. Chinese refinery turnarounds were significantly higher year-on-year during October and November, limiting crude intake.
More persistent medium-term pressures explain a larger share of the increase. Sanctions-related frictions account for roughly 60 million barrels, or about 28 per cent of the build-up, according to Kpler’s data.
Iran is the single largest contributor to the recent rise in oil on water. Iranian crude volumes offshore have climbed sharply since September as tighter US sanctions have complicated logistics and slowed discharges into China. While production and exports have continued to rise, moving those barrels has become more difficult, leaving more oil stranded offshore.
The disruptions caused by Ukrainian drone attacks on Russian refineries have had a similar effect. With several hundred thousand barrels per day of processing capacity offline, crude that would normally be refined domestically has instead been diverted to export markets, adding to floating inventories.
The largest share of the build-up, around 95 million barrels, or 44 per cent reflects longer-term structural shifts, according to Kpler’s assessments. As Opec+ unwound voluntary production cuts earlier this year, domestic demand absorbed much of the additional supply through the summer. Since September, however, incremental barrels have increasingly flowed into export markets. At the same time, non-Opec+ supply growth has become heavily concentrated in the Atlantic Basin. Meanwhile record production in the US, Canada, Brazil, Norway, and Guyana has generated more export-orientated crude that must travel longer distances, particularly to Asia.
So, what does this mean for oil markets? From a sentiment perspective, surging oil-on-water volumes are often interpreted as bearish and may help explain why prices have recently fallen towards the $60 a barrel range. However, the market’s next move will depend on how quickly the build-up is cleared and how demand evolves.
Kpler forecasts demand growth of 1.3 million barrels a day next year, while Opec projects growth of 1.4 million bpd. In response, the Opec+ group has already taken precautions, opting to pause the unwinding of voluntary production cuts during the first quarter of 2026 to avoid a further oversupply build-up.
As refinery maintenance eases and new capacity gradually comes online, part of the floating surplus should be absorbed by Asian markets, helping to cushion the impact of the excess supply.
Amena Bakr is the head of Middle East Energy and Opec+ research at Kpler, an independent global commodities trade intelligence company
