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IEA Slashes 2026 Oil Demand Forecast, Projects Rebound Next Year

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IEA Slashes 2026 Oil Demand Forecast, Projects Rebound Next Year

The International Energy Agency on Wednesday lowered its global oil demand forecast for 2026 amid war-driven headwinds while projecting a rebound next year.

The agency now expects oil consumption to fall by 1.1 million barrels per day this year, 700,000 barrels lower than last month's projection. Second-quarter deliveries slumped by 5 million barrels a day year over year "in the face of higher fuel prices and disruptions to product availability," the IEA said in its latest monthly report.

"Despite the significant reductions in demand for crude oil and refined products, the buffers in the system continue to erode at a record pace," the agency said. On average, global observed oil stocks have dropped by 3.8 million barrels a day since the start of the US/Israel war with Iran in late February, according to the report.

"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 said.

In 2027, world oil demand growth is seen rebounding to 2 million barrels a day amid expectations of a normalization of trade flows, lower oil prices and an improving economy, the agency said.

West Texas Intermediate and Brent crude oil prices were below $80 a barrel each intraday Wednesday.

The US and Iran recently agreed to end their war and reopen the Strait of Hormuz, the world's most important chokepoint for crude flows. The two sides are scheduled to sign their peace deal in Switzerland Friday, which would kick off another round of negotiations on Tehran's nuclear program as Iran seeks sanctions relief.

"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 Wednesday.

Global supply is seen dropping by 3.9 million barrels per day to 102.4 million barrels this year before rebounding by 8 million barrels a day to 110.3 million barrels in 2027, according to the report.

"The (projected oil surplus) may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis," the IEA wrote.

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