The International Energy Agency (IEA) has announced that it has revised down its global oil market forecasts for 2026 amid the continued closure of the Strait of Hormuz, renewed hostilities in the Middle East and elevated fuel prices.
According to the IEA, global oil demand is now expected to decline by 1.6 million barrels per day (bpd) in 2026, representing a downward revision of 510,000 bpd compared to its previous forecast. Demand is projected to fall by 4.9 million bpd year on year in the second quarter and by 2.8 million bpd in the third quarter, before returning to growth of 580,000 bpd in the fourth quarter. For 2027, global oil demand is forecast to increase by 2.4 million bpd.
Global oil supply forecast at 102 million bpd in 2026
Global oil supply increased by 2.4 million bpd month on month to 101.5 million bpd in July, but remained 6.3 million bpd below the year-ago level, with 8.3 million bpd of Gulf production still shut in. Renewed hostilities and maritime disruptions prompted the IEA to lower its third-quarter supply forecast by 1.7 million bpd compared to its previous report. Global supply is now expected to decline by an average of 4.3 million bpd in 2026 to 102 million bpd, before rebounding by 8.3 million bpd to 110.3 million bpd in 2027.
Gulf oil production increased by 2.5 million bpd in July to 23.9 million bpd, following a 3.7 million bpd increase in June. However, regional exports fell by 2.1 million bpd to 15 million bpd after the Strait of Hormuz was effectively closed again in early July and oil infrastructure and tankers came under attack.
Oil inventories fall below 7.9 billion barrels
Global observed oil inventories declined by 69 million barrels in July, bringing total stocks to below 7.9 billion barrels for the first time since April 2025. Inventories have fallen by a cumulative 410 million barrels since the end of February. The IEA now expects the global oil market to record a deficit of 1.8 million bpd in the third quarter, compared to approximately 800,000 bpd forecast previously.
North Sea Dated reached $105/bbl in July
Benchmark crude prices showed significant volatility during July. North Sea Dated increased by $25.67/bbl during the month to $96.80/bbl at the end of July, having reached as high as $105/bbl on July 23 following renewed hostilities. On August 12, the benchmark was trading at around $92/bbl.
As SteelOrbis reported previously, Iran stated that the Strait of Hormuz, which remains effectively closed to most commercial traffic, will remain closed until the US meets its conditions. These include ending the US naval blockade of Iranian ports, lifting sanctions, releasing Iranian assets and paying compensation for damage caused during the conflict.
