Global oil supply and demand will fall further than previously thought this year, the International Energy Agency said on Friday, as a lack of progress in ending the Iran war delays the return of normal Middle East flows into 2027 and sends fuel prices soaring.
An increase in attacks on oil tankers in Middle East shipping routes has helped send crude prices towards $110 a barrel this week for the first time since May. But this hike is overshadowed by the surging price of fuels such as diesel, which have hit record highs.
World oil supply in 2026 is now expected to decline by 5.7 million barrels per day, or about 6%, the IEA said, up from a drop of around 4% seen previously. With supplies short, the world is using up inventories at a record pace. Global stocks fell by 3.1 million bpd in August, the IEA said.
“Inventories have so far played a crucial role in balancing the market,” the IEA, which advises industrialised countries, said in a monthly report.
“With buffers shrinking and the global refining system stretched to the limit, the need for progress in resolving the conflict in the Middle East – and the Russia-Ukraine war, which is now in its fifth year – is greater than ever to avoid further market tightening.”
Demand is also falling more than expected, partly due to record fuel prices. World oil demand will drop by 2.5 million bpd this year, the IEA said, more than its previous forecast of a 1.6 million bpd decline.
(Reporting by Alex Lawler, editing by Tomasz Janowski and Elaine Hardcastle)