Crude Prices Plummet on IEA Warning of Record Oil Demand Drop

Crude oil prices have fallen back after reaching a three-and-a-half month high on Thursday, following a rally of +6.7%. The International Energy Agency (IEA) has warned that high oil prices and restricted supply will cause the biggest drop in global oil demand this year since the Covid-19 pandemic.

The IEA increased its estimate for this year's global oil deficit to 1.7 million bpd from last month's 1.3 million bpd, and pushed back the return of a global oil surplus until 2027, compared to its previous estimate of late 2026.

Oil prices have support due to concerns over a potential conflict in the Middle East, with Iran and the US escalating their hostilities. The Houthi rebels in Yemen have also been targeting energy facilities in Saudi Arabia, disrupting oil production and exports.

Vitol Group notes that global oil markets are tightening, with losses of about 2 million bpd from crude exports in the Middle East and another 2 million bpd from Russia due to Ukraine's drone attacks.