Global oil demand set to shrink in 2026 – IEA
The Paris-based International Energy Agency (IEA) expects global oil demand to decline by 2.5 million b/d in 2026, about 940,000 b/d higher than its previous estimates.
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The IEA said global oil demand will slump as the ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption – stopping short of providing an average forecast for the scale of the rise.
“The continuing impasse in negotiations between the United States and Iran delays the prospect of a normalisation of flows [through the Strait of Hormuz] into next year,” the energy agency said.
A slight recovery in global oil demand is expected next year, if hostilities in the Middle East cease. The IEA sees oil demand to expand by 2.6 million b/d in 2027 – about 200,000 b/d higher than its previous estimates.
Supply estimates
Global oil supply fell by 1.6 million b/d to 100.1 million b/d in August, as more than 10 million b/d of output from the Persian Gulf remained shut-in amid heightened security risks, the IEA noted in its monthly Oil Market Report (OMR).
The Middle East war has severely affected output from Gulf countries such as Iraq, Qatar, Kuwait, the UAE and Saudi Arabia. Expected recovery in the Gulf flows is now “deferred until 2027,” the IEA said.
“Total oil exports from Gulf countries in August are currently estimated around 13 mb/d [13 million b/d], nearly half their pre-war level,” the energy agency noted.
Global supply is on track to decline by 5.7 million b/d, to 100.7 million b/d this year, before rebounding by 8 million b/d growth in 2027, according to the IEA’s estimates.
The latest renewed US-Iran hostilities could derail projections for an oil market surplus next year, the IEA warned earlier.
“With the protracted US-Iran diplomatic standoff and renewed attacks in both the Gulf and the Red Sea’s Bab el-Mandeb choke point continuing to hamper the normalisation of oil flows, we have further cut our supply and demand projections for the remainder of the year,” the IEA noted.
By Aparupa Mazumder
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