The oldest backups will be deleted when Time Machine requires the space they occupy, but they will only be deleted after Time Machine creates a new backup.
Before it does that, Time Machine resorts to a number of increasingly desperate attempts to create enough space for that backup, while retaining an absolute minimum of one and only one complete backup.
Apple does not provide guidance for the backup device capacity because it is simply not possible to do that. Two or three times the total amount of data that needs to be backed up is usually OK. However, it is also usually much more than necessary. If Apple told us we must purchase (for example) a 4 TB hard disk drive it would result in a lot of users not even attempting to use Time Machine, and that would be bad.
Bottom line: If Time Machine tells you it needs more space, then it needs more space. Obtain a larger backup drive and create a new backup, after which you can consider erasing the existing one because it might contain a large backup you no longer need (a large virtual machine disk image is a popular reason). That will defer the problem to another day.