The IEA has again cut its forecast for demand in 2026, saying deep cuts to consumption have spread beyond the sectors and regions that were initially the most heavily affected by the US-Iran war. Its first forecast for 2027 suggests an enormous global surplus of oil.
"Deliveries of major fuels, especially gasoil, are showing signs of strain across almost all regions," the IEA said today in its latest Oil Market Report (OMR). Higher prices and "a harsher macro climate" have combined "to shift all product categories into decline", it said.
It now sees demand in 2026 at 103.3mn b/d, compared with 104mn b/d in its May OMR — a 1.1mn b/d drop from 2025. It said preliminary data suggest demand in the second quarter will be 5mn b/d lower than a year earlier because of higher prices and disruptions to products availability. This will be the first global quarterly demand fall since the pandemic year of 2020, and it said weakness will continue into the third quarter. The IEA had previously assumed a recovery starting in June.
The agency sees a "relatively modest" demand rebound to 105.3mn b/d in 2027, but said this is "subject to a substantial level of uncertainty" surrounding the proposed peace deal to end the war.
It puts supply in 2026 at 102.4mn b/d, a 200,000 b/d upgrade from its prior OMR. But in 2027 it forecasts an 8mn b/d surge in supply, to 110.3mn b/d, as Mideast Gulf production recovers and Opec+ raises its output targets.
These supply and demand forecasts suggest an enormous surplus of oil in 2027. This may provide "an opportunity to replenish depleted inventories, or to build new strategic reserves", the IEA said. Global observed oil stocks have dropped by 3.8mn b/d since the start of the US-Iran war, with preliminary data showing a 4.6mn b/d draw in May.
The IEA said 252mn bl have been released as of 12 June under its co-ordinated emergency stocks move, and a further 79mn bl are scheduled to be released by the end of July. This leaves 107mn bl to be released depending on market needs, the IEA said.
