Global oil supply is expected to decline in 2026 before rebounding to above 110 mb/d in 2027.
PARIS: World oil demand is forecast to decline by 1.6 million barrels per day (mb/d) in 2026, 510,000 barrels per day (kb/d) lower than the estimate in last month’s report, as the prolonged closure of the Strait of Hormuz and elevated fuel prices weigh on consumption, according to the International Energy Agency’s (IEA) August Oil Market Report (OMR), released on Wednesday (August 12, 2026).
The report said the contraction in annual demand is expected to ease from 4.9 mb/d in the second quarter of 2026 to 2.8 mb/d in the third quarter, before returning to growth in the final quarter. Demand is projected to rise by 2.4 mb/d in 2027, with growth of 580 kb/d expected in 4Q26.
Meanwhile, the global oil market is expected to post a deficit of 1.8 mb/d in 3Q26, more than double the roughly 800 kb/d shortfall projected in last month’s report.
After a brief respite in June, global observed oil inventories fell sharply by 69 million barrels (mb), or 2.2 million barrels per day (mb/d), in July, driven almost entirely by a decline in oil held on water.
By the end of July, global observed stocks had dropped below 7.9 billion barrels for the first time since April 2025. Cumulative stock draws from the end of February through July reached 410 mb, equivalent to an average decline of 2.7 mb/d.
Although the market is expected to return to surplus towards the end of this year, significant risks remain, with the urgency of reopening the Strait of Hormuz increasing as previously available inventory buffers rapidly deplete.
Global oil supply is forecast to decline by 4.3 million barrels per day (mb/d) on average in 2026 to 102 mb/d, as a 1.4 mb/d increase in output from the Americas only partly offsets losses in the Middle East and Russia. Supply is then projected to rebound by 8.3 mb/d in 2027, reaching 110.3 mb/d.
