IEA Cuts Oil Demand Forecast Again
The International Energy Agency predicts global demand will fall by 1.6 million barrels per day in 2026, a significantly more pessimistic outlook than last month's estimates, as fuel prices rise.
The International Energy Agency predicts global demand will fall by 1.6 million barrels per day in 2026, a significantly more pessimistic outlook than last month's estimates, as fuel prices rise.
The Paris-based International Energy Agency (IEA) released a new, more pessimistic report on the global oil market on Wednesday. According to its latest estimates, global oil demand in 2026 will fall by as much as 1.6 million barrels per day.
This figure represents a significant deterioration from the July forecast, when the IEA predicted a decline of one million barrels per day. The agency cites the ongoing blockade of the Strait of Hormuz and high fuel prices that are stifling consumption as the main reasons for the revision.
The Strait of Hormuz, through which roughly one-fifth of the world's total oil supply normally passes, remains closed to traffic. This is a direct consequence of the US and Israeli attacks on Iran in late February of this year. Iran responded by effectively shutting down tanker and cargo traffic through this crucial maritime route.
"The prolonged closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption," the IEA said in a statement carried by Channel News Asia. Despite an alleged ceasefire and repeated claims that a deal to reopen the strait is imminent, the agency highlights what it called "sudden diplomatic reversals" that have resulted in only a handful of ships passing through, causing highly volatile prices on global exchanges.
The report also presents contradictory data on global supply. On one hand, July saw a supply increase of 2.4 million barrels per day, reaching a total of 101.5 million barrels per day. However, this is still as much as 6.3 million barrels per day less than a year earlier, before the conflict erupted.
The IEA specifically emphasized that "renewed hostilities and maritime disruptions in July and early August have undermined recovery efforts." Damaged oil infrastructure in several Gulf countries further complicates the situation. As a result, the agency now expects global supply to fall by an average of 4.3 million barrels per day this year, before recovering next year.
Despite the gloomy projections, on the demand side, the IEA predicts a return to growth in the fourth quarter of this year. This suggests that the market could begin to stabilize if there is a de-escalation of the conflict and a reopening of the Strait of Hormuz, which will also largely determine energy prices for European consumers.
