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IEA Forecasts Smaller Drop in 2026 Oil Demand as Consumption Picks Up

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IEA Forecasts Smaller Drop in 2026 Oil Demand as Consumption Picks Up

The International Energy Agency on Friday projected a smaller decline in global oil demand in 2026 amid signs of a rebound in consumption as crude flows improve.

The agency now expects oil consumption to fall by 1 million barrels per day this year, compared with a 1.1 million-barrel drop forecast in June. That would mark the first annual contraction since 2020, CNBC reported.

"A recovery in world oil demand is underway, with consumption set to rise from its May nadir on seasonal trends and as pent-up demand is released in line with a rebound in product supplies," the IEA said in its latest monthly oil market report. "The upswing in fuel use during the peak summer travel season is set to get an additional boost from the release of pent-up demand."

The IEA projects annual demand contractions to ease in the third quarter to 1.7 million barrels per day from 4.8 million barrels in the second quarter. It sees consumption rising by 1.2 million barrels per day in the final quarter of 2026.

The IEA anticipates global consumption to be up by more than 8 million barrels per day by October from May's low point, when demand declined by 5.3 million barrels per day year over year.

The agency continues to expect next year's world oil demand to grow by 2 million barrels per day.

World supply is on track to decline by an average of 3.7 million barrels per day this year to 102.6 million barrels, the IEA said, compared with its June forecast that called for a drop of 3.9 million barrels per day.

Global supply jumped by 4.1 million barrels per day in June as the Strait of Hormuz reopened following a memorandum of understanding between the US and Iran to end their war.

"While the global oil market balance looks set to swing back to surplus towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments," the IEA said.

"Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalization in oil markets," according to the IEA report.

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