The IEA has downgraded its outlook for global oil demand this year, citing persistent disruptions to exports through the strait of Hormuz and elevated fuel prices.
In its latest Oil Market Report (OMR), published on Wednesday, the IEA said 2026 demand will decline by 1.56mn b/d, around 510,000 b/d more than it forecast in its previous OMR, to 103.29mn b/d.
It said demand contracted by 4.9mn b/d on the year in the second quarter, and said this would ease to 2.8mn b/d in the current quarter before a return to growth of around 580,000 b/d in the final three months of the year.
The agency assumes a de-escalation between the US and Iran will see oil flows gradually recover in the coming months, and on that basis it forecasts global oil demand will grow by 2.4mn b/d, to 105.7mn b/d, in 2027.
A recovery in movement through the strait of Hormuz would reverse a global annual supply contraction of around 4.3mn b/d in 2026 into supply growth of 8.3mn b/d in 2027, the IEA said.
Consequently, this would flip a projected supply deficit of 1.3mn b/d in 2026 into a 4.6mn b/d surplus in 2027, allowing countries to replenish their strategic and commercial stocks.
A potential supply overhang of up to 4mn b/d from the fourth quarter of 2026 "could return global stocks to their February 2026 levels by mid-year and push them 1bn bl above that level by end-2027," it said.
The IEA said the global stocks drawdown rate was 2.7mn b/d in February-July, leaving observed stocks below 7.9bn bl for the first time since April 2025.
The agency said the supply disruptions through the strait of Hormuz are prompting countries to increase oil storage capacity, to guard against future supply stocks.
