The International Energy Agency (IEA) saw a sharp decline in global oil demand outlook for 2026, forecasting a decline of 1.6 million barrels per day (mb/d). The agency expects demand to recover with growth of 2.4 mb/d by 2027.
The latest projection was released in the IEA’s August Oil Market Report, highlighting a deeper contraction than its July estimate. The agency previously expected global oil demand to drop by 1 mb/d in 2026 and rebound by 2 mb/d in 2027.
The IEA attributed the downgrade largely to the continued closure of the Strait of Hormuz and elevated fuel prices. Disruptions through the key shipping route have restricted oil and refined-product flows, while higher prices are putting pressure on consumption.
According to the latest forecasts, the IEA reduced expectations regarding global demand by 510,000 b/d from its previous estimates. The current estimate for world demand amounts to 103.3 mb/d in 2026.
Demand contracted by 4.9 mb/d year-on-year in the second quarter. The IEA expects the contraction to ease to 2.8 mb/d in the third quarter before demand returns to growth in the final quarter.
The supply outlook has also deteriorated. The IEA expects global oil supply to fall by 4.3 mb/d in 2026 to about 102 mb/d. It projects a strong rebound of 8.3 mb/d in 2027, taking supply to roughly 110.3 mb/d. Global supply rose by 2.4 mb/d in July to 101.5 mb/d. However, output remained 6.3 mb/d below year-earlier levels, with significant Gulf production still shut in.
Normalising trade flows would also support refinery operations and improve fuel availability. However, the agency noted that the recovery depends heavily on geopolitical developments and the restoration of maritime transit.
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