The International Energy Agency (IEA) again cut its forecast for global oil demand in 2026, anticipating a reduction of 1.1 million barrels per day compared with 2025, due to the conflict in the Middle East.
In the monthly oil market report, the international organization cut its forecast for global oil demand this year by more than 700,000 barrels per day, compared with those issued in May, despite the agreement between the United States and Iran.
The IEA expects global demand to fall by 1.1 million barrels per day in 2026, compared with 2025, due to the price increases that occurred with the outbreak of the war on February 28 and the closure of the Strait of Hormuz.
The closure of the Strait of Hormuz triggered a drop in global supply of 5 million barrels per day (4.8%) in the second quarter, compared with the same period last year, which represents the first quarterly decline since 2020.
With the agreement to end the war between the United States and Iran, which is due to be formalized on Friday in Switzerland, and whose details are not yet fully known, the report’s authors believe that the reopening of the Strait of Hormuz will allow more oil to reach the market and that this will lead to higher consumption, but in a very gradual and not immediate manner.
In the third quarter, demand will remain at 1.7 million barrels per day, thus below what was recorded a year ago, and it will be necessary to wait for the last three months to observe volumes higher than those of 2025, at 1.1 million barrels per day.
That trend is expected to solidify in 2027 as crude oil flows from the Persian Gulf increase and as declines in the price per barrel intensify, so consumption is projected to grow by 2 million barrels per day.
On the supply side, fluctuations have been and will continue to be even larger, as production will fall by 3.9 million barrels per day this year compared with 2025, standing at 102.4 million barrels per day before rising by 8 million barrels per day in 2027.
In May, only 94.5 million barrels per day were placed on the market, meaning 600,000 less than the previous month and 13.6 million barrels less than before the start of the conflict.
The main consequence of this production loss, due to the inability to export most of the Persian Gulf crude that normally exited via the Strait of Hormuz, was a drop in inventories, which accelerated even more in May with a loss of 143 million barrels.
The IEA insists that the recovery forecasts for 2027 are subject to a high degree of uncertainty, while awaiting the disclosure of the details of the agreement between the United States and Iran and the clarification of some points still under negotiation, particularly with regard to navigation through the Strait of Hormuz.
The same report notes that oil reserves of OECD countries reached the lowest level since 1990.
“Despite the significant drop in oil demand (…), reserves continue to fall at a record pace,” the IEA notes in the report, indicating that OECD country reserves have fallen by 163 million barrels since the start of the war in the Middle East.
