Global oil demand in 2026 will contract at a vastly quicker pace than previously forecast, but not by enough to close the supply shortfall, the IEA said today.
In its latest Oil Market Report (OMR), the IEA said it sees demand at 104mn b/d in 2026, a 420,000 b/d contraction on the year. The IEA's pre-war forecast for the year was 640,000 b/d of demand growth, and its previous monthly forecast was for an 80,000 b/d contraction.
Weakening economies and demand-saving measures are having an effect on consumption, it said, as governments and consumers alike respond to the price volatility recorded in the 10 weeks since the US and Israel began their war with Iran.
"For now, the steepest losses are seen in the petrochemical sector where feedstock availability is becoming increasingly constrained," the IEA said. "Aviation activity is also running well below normal levels".
Around half the demand downgrade from pre-war levels, or 700,000 b/d, is for LPG/ethane and naphtha. Jet fuel demand is cut by 210,000 b/d.
The agency sees the biggest hit coming in the current quarter, when it forecasts demand to fall by 2.45mn b/d. Of this, 1.5mn b/d is in non-OECD countries, mostly in the Middle East and Asia-Pacific.
Net lost supply since February now stands at 12.8mn b/d, with 14mn b/d of shut-in Mideast Gulf production relieved only slightly by higher exports from the US, Kazakhstan, Russia and Venezuela. The IEA sees supply this year at 102.2mn b/d, on the assumption that the strait of Hormuz reopens to tanker traffic in June.
The resulting deficit will see inventories falling throughout the year, the IEA said. Global stocks drew by 129mn bl in March and by 117mn bl in April, the latter a preliminary figure. Overall drawdown, including from industry stocks and from the IEA co-ordinated release in March, could reach 900mn bl by September. Rebuilding this will require around an extra 1mn b/d of supply for the next three years on top of underlying demand growth, the IEA said, again assuming a June resumption of shipping through Hormuz.
The IEA has postponed publication of its Oil 2026 report, which was scheduled for June, until "a later date". The report was to give analysis and forecasts to 2031.
