IEA cuts global oil demand growth forecast for 2026

Paris-based International Energy Agency (IEA) now expects global oil demand to grow by 640,000 b/d in 2026 - about 210,000 b/d lower than its previous estimate.

IMAGE: Crude oil pipelines connected to an oil refinery. Getty Images

The IEA said global oil demand growth will not exceed the 770,000 b/d increase recorded in 2025 but stopped short of providing an average forecast for the scale of the rise.

The downward revision in oil demand growth forecast comes shortly after the onset of a joint military action by the US and Israel in Iran, leading to the closure of the Strait of Hormuz – a highly critical conduit handling about 25% of global seaborne crude oil flows.

Crude and oil product flows through the strait has plunged from around 20 million b/d before the conflict “to a trickle currently,” the IEA said.

The energy agency and its 32 member countries, on Thursday, agreed to release 400 million bbls from strategic reserves as the conflict continues to disrupt oil flows from the region.

The disruption is “expected to curb global oil demand by around 1 mb/d [1 million b/d] during March and April compared to previous estimates,” the IEA said.

Brent crude’s price has “gyrated wildly,” surpassing $100/bbl, since the beginning of the conflict on 28 February. “More broadly, higher oil prices and a deteriorating economic outlook have begun to erode demand across the product spectrum,” the IEA added.

Supply forecast

Global crude oil supply is projected to plunge by 8 million b/d in March, despite curtailments in the Middle East being partly offset by higher output from OPEC+ producers like Russia and Kazakhstan, the IEA noted in its monthly Oil Market Report (OMR).

So far, producers in the Persian Gulf region have cut total oil production by at least 10 million b/d, according to the IEA. “In the absence of a rapid resumption of shipping flows, supply losses are set to increase,” the energy agency said.

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

“With few ships currently able or willing to load cargoes at port, and domestic storage tanks filling up, producers in the region are reducing or shutting in production,” the IEA noted.

The energy agency now projects global oil supply to grow by an average of 1.1 million b/d in 2026, with non-OPEC+ producers accounting for the entire increase. It has not provided an average forecast for the scale of the global supply growth.

“With nearly 20 mb/d [20 million b/d] of crude and product exports currently disrupted and limited alternative options to bypass the world’s most critical oil transit chokepoint, producers and consumers globally are feeling the strain,” the IEA further added.

By Aparupa Mazumder

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