- Global oil supply will remain below demand through 2026, says IEA
- Oil supply dropped by 1.8 mb/d in April, totaling 12.8 mb/d loss since February
- Global oil demand expected to contract by 420,000 bpd in 2026, worsening supply gap
The International Energy Agency (IEA) has warned that global oil supply will remain below demand for the rest of 2026, with inventories draining at a record pace and the world's most critical oil shipping route still severely restricted.
IEA cited it as a consequence of the US-Israel war on Iran that has triggered the largest oil supply disruption in history and wiped out more than 12 billion barrels of cumulative supply since fighting began in late February.
In its May Oil Market Report, the IEA said global oil supply declined by a further 1.8 million barrels per day in April to 95.1 mb/d, taking total losses since February to 12.8 mb/d.
Output from Gulf countries affected by the closure of the Strait of Hormuz was 14.4 mb/d below pre-war levels. Assuming flows through the Strait gradually resume from June, global oil supply is projected to decline by 3.9 mb/d on average in 2026, more than double the IEA's previous forecast of a 1.5 mb/d drop.
The demand picture has deteriorated equally sharply. The IEA now sees global demand contracting by 420,000 barrels per day in 2026 — a dramatic reversal from its pre-war forecast of 640,000 bpd growth, and significantly worse than last month's projection of an 80,000 bpd contraction.
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The steepest losses are in the petrochemical sector, where feedstock availability is becoming increasingly constrained, while aviation is running well below normal levels.
Critically, the demand destruction is not enough to close the gap. The resulting deficit is draining inventories throughout the year — global stocks drew by 129 million barrels in March and a further 117 million barrels in April.
The agency warned that if the Strait of Hormuz remains closed beyond its assumptions, "energy markets and economies around the world need to brace for significant disruptions in the months to come," adding that "resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy."
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