The International Energy Agency expects the oil market to recover in 2027 following weak demand amid disruptions arising from the Middle East war, after the US and Iran reached an interim peace deal that could lead to a reopening of the Strait of Hormuz.
In its June oil market report published Wednesday, the IEA said global oil demand is anticipated to decline by 1.1 million barrels per day year over year in 2026, a downgrade of 700,000 barrels per day from its previous month's forecast, as deliveries fell in the second quarter due to increased fuel prices and supply disruptions. Meanwhile, global supply is forecast to drop by 3.9 million barrels of oil per day on average in 2026, to 102.4 million barrels per day, before rebounding to 110.3 million barrels per day in the next year.
"Further declines in the coming months could still take global oil stocks to historic lows before the market balance shifts to surplus towards the end of the year," the IEA noted.
Looking ahead, a rebound in demand growth of a "modest" 2 million barrels per day is projected in 2027 as trade flow normalizes, oil prices decline and the economic outlook brightens, under the assumption that the deal holds.
"While the US‑Iran interim agreement paves the way for a rebound in Middle East exports, operational and political constraints, including prolonged demining and unresolved transit arrangements, leave downside risks to the outlook," the IEA said.
The US-Iran agreement is set to be signed on Friday in Switzerland.