Global oil demand set to slump in 2026 – IEA
The Paris-based International Energy Agency (IEA) expects global oil demand to shrink by 1.6 million b/d in 2026 – 510,000 b/d higher than its previous estimates.
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The IEA said global oil demand will contract, 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 global oil balance is now expected to show a deficit of 1.8 mb/d [1.8 million b/d] in 3Q26 [third quarter of 2026],” the energy agency said.
A recovery in global oil demand is expected next year, if hostilities in the Middle East cease. The IEA sees oil demand to expand by 2.4 million b/d in 2027 – about 400,000 b/d higher than its previous estimates.
Supply estimates
Global oil supply rebounded by 2.4 million b/d to 101.5 million b/d in July, the IEA said. However, supply remains 6.3 million b/d below year-ago levels, “with 8.3 mb/d [8.3 million b/d] of Gulf output still shut in”, 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.
After an increase of 3.7 million b/d in June, Gulf oil production rose by 2.5 million b/d in July to 23.9 million b/d – still below 8.3 million b/d pre-war levels, the IEA said.
“Renewed hostilities and maritime disruptions in July and early August undermined the recovery efforts,” the agency said.
Global supply is on track to decline by 4.3 million b/d, to 102 million b/d this year, before rebounding by 8.3 million b/d, to 110.3 million b/d in 2027, according to the IEA’s estimates.
Supply growth of 1.4 million b/d from the US will “only partly offset” losses in the Middle East and Russia, the agency added.
The IEA warned that the latest renewed US-Iran hostilities could derail projections for an oil market surplus next year.
“With an agreement enabling the reopening of Hormuz and unhindered transit through the Bab el-Mandeb Strait still elusive, we have again lowered supply estimates for the rest of the year,” the IEA noted.
By Aparupa Mazumder
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