Global oil demand set to shrink in 2026 – IEA

The Paris-based International Energy Agency (IEA) expects global oil demand to decline by 1 million b/d in 2026 – stopping short of providing an average global oil demand forecast.

IMAGE: Oil storage tanks. Getty Images

The IEA expects global oil demand to contract, as the ripple effects of the Middle East geopolitical unrest continue to impact various products and regions.

At the same time, a recovery in global oil demand from a low of 97.9 million b/d in May “is underway,” the IEA said. The Paris-based agency expects global demand to be up by more than 8 million b/d by October from the May low point.

“The upswing in fuel use during the peak summer travel season is set to get an additional boost from the release of pent-up demand,” it added.

The IEA estimates global oil demand to return to growth in 2027. Global oil demand is projected to rise by a relatively modest 2 million b/d, it said, stopping short of providing an average forecast for the scale of the rise. 

Supply estimates

Global oil supply rebounded by a sharp 4.1 million b/d to 98.8 million b/d in June, "as a resumption of flows through the Strait of Hormuz underpinned a partial recovery in Gulf production," the IEA noted in its monthly Oil Market Report (OMR).

However, total global oil output remains about 9.4 million b/d below pre-war levels, with global supply “on track” to decline by 3.7 million b/d to 102.6 million b/d this year, before rebounding by 7.5 million b/d in 2027, according to the IEA’s estimates.

Despite a tentative recovery in the Strait of Hormuz oil flows and the first build-up in global stocks since the conflict began, the IEA warned that the latest renewed US-Iran hostilities could derail projections for an oil market surplus next year.

The Middle East war has severely affected output from Gulf countries such as Iraq, Qatar, Kuwait, the UAE and Saudi Arabia.

“While the global oil market balance looks set to swing back to surplus towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments,” the energy agency added.

By Aparupa Mazumder

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