Global oil demand to contract in 2026 – IEA

The Paris-based International Energy Agency (IEA) now expects global oil demand to contract by 80,000 b/d in 2026, reversing its previous forecast for a growth of 640,000 b/d.

IMAGE: Oil pumpjack. Getty Images

The IEA said global oil demand is expected to decline by about 1.5 million b/d in the second quarter of this year, noting the sharpest drop in consumption since the COVID-19 pandemic.

The energy agency stopped short of providing an average forecast for the scale of the decline in global oil demand growth.

The downward revision in demand forecast comes amid the US-Israel military action against Iran, leading to the closure of the Strait of Hormuz – a highly critical conduit handling about 25% of global seaborne crude oil flows.

“It remains unclear whether the ceasefire will turn into a lasting peace and a return to regular shipping flows through the Strait of Hormuz,” the IEA said.

Crude and oil product exports through the region has plunged by more than 13 million b/d, according to the energy agency.

Meanwhile, physical crude oil prices have surged to record levels near $150/bbl, “far above the prices in futures markets,” since the beginning of the conflict on 28 February.

“Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy,” the energy agency said.

Supply estimates

Global oil supply plummeted by 10.1 million b/d to 97 million b/d in March, amid continued attacks on Middle Eastern energy infrastructure and restrictions to vessel transits through the Strait of Hormuz, the IEA noted in its monthly Oil Market Report (OMR).

OPEC+ production has declined by 9.4 million b/d to 42.4 million b/d last month, while non-OPEC+ supply fell by 770,000 b/d to 54.7 mb/d, accounting for one of “the most severe oil supply shock in history.”

So far, oil production cuts and damages to regional energy infrastructure due to the war, have resulted in cumulative supply losses of more than 360 million bbls in March and 440 million bbls projected for April, the IEA added.

Iraq, Qatar, Kuwait, the UAE and Saudi Arabia have accounted for most of the supply reductions, the IEA said previously.

By Aparupa Mazumder

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