The International Energy Agency on Friday said a full recovery in Middle East supplies is not expected before 2027, projecting average global oil supplies to fall down 5.7 million barrels per day year-on-year this year.
In its monthly oil market report for September, the agency revised its 2026 average global oil supply forecasts to 100.7 million b/d, 1.3 million b/d lower than its estimates in its previous report.
"Total oil supply is set to fall by 5.7 mb/d to 100.7 mb/d this year, with the expected recovery in the Gulf now deferred until 2027," the agency said.
In August, total worldwide production declined by 1.6 million b/d month-on-month to 100.1 million b/d, with over 10 million b/d of Middle Eastern output remaining offline due to heightened security risks.
In 2027, however, the agency expects global production to recover by 8 million b/d.
Since the beginning of the Iran war began, global oil inventories have fallen by 507 million barrels, an average draw of 2.8 million b/d, with stocks dropping by 95 million barrels or 3.1 million b/d in August alone, the IEA said.
"With buffers shrinking and the global refining system stretched to the limit, the need for progress in resolving the conflict in the Middle East - and the Russia-Ukraine war, which is now in its fifth year - is greater than ever to avoid further market tightening and demand destruction," the agency said.
The IEA estimated total Gulf oil exports in August at around 13 million b/d, nearly half the pre-war level.
"Crude losses appear to have narrowed to just below 45%, supported by increased flows bypassing the Strait, as well as US military escorts protecting flows through Hormuz. However, refined product and LPG exports remain nearly 60%, or 3.7 mb/d, less than in February," the agency said.
Oil on water volumes fell by 65 million barrels due to renewed attacks on Middle Eastern tanker traffic, the agency added.
Meanwhile, worldwide demand is expected to fall by 2.5 million b/d in 2026, about 940,000 b/d more than last month's forecast "as the continuing impasse in negotiations between the United States and Iran delays the prospect of a normalisation of flows into next year."
The declines is expected to mainly impact middle distillates and petrochemical feedstocks, particularly in Asia, the IEA said.
Next year, global oil demand is expected to rebound by 2.6 million b/d in 2027, nearly making up for this year's decline.
Among non-OPEC output, the Americas Quintet are expected to dominate growth adding 1.4 million b/d in 2026 and 1 million b/d in 2027.