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IEA Sharply Cuts 2026 Oil Supply Forecast Amid Middle East Hostilities
The International Energy Agency (IEA) on Wednesday revised its global oil supply forecast downward, projecting a decline of 4.3 million barrels per day (bpd) in 2026 due to renewed hostilities in the Middle East. This updated outlook, a steeper drop than the 3.7 million bpd contraction forecast in July, points to a market facing a deepening supply deficit.
Tighter Supply Outlook
The Paris-based agency now projects total global supply will average 102.02 million bpd for the year, its lowest estimate yet. The IEA directly attributed the revision to ongoing disruptions in critical shipping chokepoints.
"With an agreement enabling the reopening of Hormuz and unhindered transit through the Bab el-Mandeb Strait still elusive, we have again lowered supply estimates for the rest of the year," the IEA stated in its report. The agency cut its third-quarter supply forecast by 1.7 million bpd compared to last month's report, reflecting the impact of maritime disruptions in July and early August.
While supply in July rose by 2.4 million bpd to 101.5 million bpd, it remained 6.3 million bpd below year-ago levels, with an estimated 8.3 million bpd of Gulf output still offline, according to the agency.
Demand and Refining Pressures
On the demand side, the IEA raised its forecast for the decline in global oil consumption this year to 1.6 million bpd, an increase of 510,000 bpd from its previous estimate. The agency cited the continued closure of the Strait of Hormuz and elevated fuel prices as primary drivers weighing on consumption.
AdRefinery operations are also under strain. The IEA trimmed its third-quarter estimate for refinery runs by 370,000 bpd, citing disruptions to Middle East product exports and attacks on Russian facilities. As a result, refining margins in the Atlantic Basin have surged to record highs amid tighter markets for light and middle distillates.
Looking ahead, the IEA anticipates the pace of demand contraction will slow through the year before growth resumes in the final quarter. The agency projects a demand expansion of 2.4 million bpd in 2027.
Market Impact
Oil prices edged higher on Wednesday, reacting to heightened concerns over supply disruptions following attacks on two ships in the Middle East. However, gains were capped by industry data indicating a rise in U.S. crude inventories.
- Brent crude futures rose 0.2% to $89.08 a barrel as of 09:06 GMT.
- U.S. West Texas Intermediate (WTI) crude increased 0.3% to $83.43 a barrel.
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