IEA cuts forecast for global oil demand in 2026

The International Energy Agency (IEA) has revised its forecast for global oil demand in 2026 downwards, anticipating a reduction of 2.5 million barrels per day, up from a previous estimate of 1.6 million barrels per day. This downward adjustment was prompted by turbulence stemming from the Middle East conflict and escalating fuel prices.

According to the IEA's latest monthly report, global oil consumption is projected to peak at 102.44 million barrels per day this year, a significant increase from the earlier forecast of 103.29 million barrels per day. The agency attributes this rise to the ongoing deadlock in talks between the United States and Iran, which is hindering the resumption of normal oil flows in 2026.

The agency also highlighted the exacerbating impact of fresh hostilities between Iran and the United States, starting in late August. These include American and Iranian strikes on oil tankers in the strategically vital Strait of Hormuz, where 20 percent of global oil supplies transit. These ongoing tensions continue to weigh on global markets and contribute to rising oil prices.

On the production front, the IEA reported a 1.6 million barrels per day decrease in global oil output, with more than ten million barrels per day of output in the Gulf region suspended due to security concerns. The agency anticipates a further reduction in total oil supply to 100.7 million barrels per day this year, with the delayed recovery in the Gulf region expected not until 2027.

In terms of exports, the IEA estimates that Gulf countries exported around 13 million barrels per day in August, a level markedly lower than their pre-war figures. The agency also pointed out that despite a rise in crude oil prices, the increase in refined product prices remains less dramatic. This discrepancy has led to record high refining margins in the Atlantic Basin, where diesel prices in the United States have recently surpassed USD 6 per gallon.

Furthermore, the IEA noted that global oil inventories dwindled by an additional 95 million barrels in August, bringing the total withdrawals since February to 507 million barrels, averaging a daily pullout of 2.8 million barrels.