IEA Downgrades Oil Demand Forecast Amid Supply Constraints
The International Energy Agency (IEA) has downgraded its forecast for global oil demand in 2026, predicting a decline of 2.5 million barrels per day year-on-year. This is 940,000 bpd lower than the agency's estimate from last month.
The IEA attributes the downgrade primarily to the ongoing impasse in negotiations between the United States and Iran, continued disruptions to Gulf oil exports, and record fuel prices, particularly for diesel.
The agency expects global oil demand to recover in 2027, reaching 105 million bpd, broadly offsetting the losses recorded in 2026. The projected decline in 2026 is likely to be comparable in scale to the four largest oil-demand shocks of the past 60 years, including the oil crises of the 1970s and the COVID-19 pandemic.
The IEA warns that the current shock differs from previous ones because it is driven by supply constraints rather than solely by weaker demand. The agency recalls that the oil shocks of the 1970s triggered a lasting structural shift in global consumption, leading to a decline in demand and slower growth later on.