IEA slashes oil demand forecast as prices surge

Paris-based International Energy Agency (IEA) has further reduced its forecast for global oil demand in 2026, citing the recent escalation in the Middle East war and rising energy prices. The agency now anticipates consumption to fall by 2.5 million barrels per day (mb/d) compared to the previous year, significantly higher than its August forecast of a 1.6 mb/d decline.

The IEA's warning comes as crude prices have remained well above pre-war levels, triggered by the US and Israeli attacks on Iran in late February. This led to a war that has damaged oil infrastructure in several Gulf countries, causing a sharp curtailment of supplies for diesel, which accounts for nearly 30% of global demand. Diesel/gasoil prices in the US surged past the US$200/bbl mark in early September, 94% above pre-war levels, with Europe and Asia not far behind.

Ukraine's strikes on Russian refineries and other energy targets are also contributing to the surge in global fuel prices. The IEA predicts that consumers will reduce their purchases due to the high prices, putting further downward pressure on demand. Additionally, renewed attacks in the Gulf and the Red Sea's Bab al-Mandeb choke point continue to hamper the normalization of oil flows, leading to further cuts in supply and demand projections for the remainder of the year.