Oil Demand Forecasted to Plummet as Global Tensions Rise
Crude oil prices declined on Friday after the International Energy Agency (IEA) forecasted a sharp drop in global oil demand this year. The IEA warned that high oil prices and restricted supply will cause the biggest decline in global oil demand since the Covid-19 pandemic. Despite the projected demand drop, the agency raised its estimate for this year's global oil deficit to 1.7 million bpd from last month's 1.3 million bpd due to the restricted supply caused by the US-Iran war.
The IEA also stated that the return of a global oil surplus will be delayed until 2027, later than its previous estimate of late 2026. The agency attributed this delay to ongoing military conflicts in the region and tensions between major oil producers such as Saudi Arabia and Iran-backed groups in Yemen.
Market analysts point out that crude prices have support from concerns over a potential prolonged conflict in the Middle East, which could limit crude supplies from the region. Additionally, attacks on Russian oil infrastructure by Ukraine's drones have curbed Russian crude production and exports.