Key facts
- Global oil demand is projected to fall by 1 million barrels per day in 2026, marking the first decline since 2020.
- The International Energy Agency (IEA) attributes this forecast to Middle East conflict and restrictions on the Strait of Hormuz.
- OPEC, however, maintains a more optimistic outlook, forecasting demand growth for 2027.
- The Strait of Hormuz, crucial for global oil transport, has seen significantly reduced traffic.
- IEA head Fatih Birol previously highlighted energy security concerns related to the Strait of Hormuz.
Global oil demand is expected to decline for the first time since 2020, according to a report from the International Energy Agency (IEA) released on July 10th. The agency forecasts a decrease of approximately 1 million barrels per day (bpd) in 2026, attributing the trend to ongoing oil trade restrictions in the Middle East and geopolitical instability, particularly concerning the Strait of Hormuz.
The IEA's projection marks a significant shift, as it would be the first annual drop in oil demand since the COVID-19 pandemic in 2020. The Strait of Hormuz, a critical chokepoint through which roughly 20% of the world's oil supply passes when fully operational, has experienced significantly reduced traffic due to conflict involving Iran. The duration of these restrictions remains uncertain and will heavily influence the annual demand figures.
While the IEA's forecast hinges on the assumption of a gradual reopening of the Strait, ongoing hostilities cast doubt on potential peace agreements. The agency noted that renewed exchanges of fire highlight the risks associated with not reaching a lasting peace, which is essential for normalizing oil markets. The IEA estimates that global supply could fall by 3.7 million bpd in 2026, potentially leading to a shortfall.
In contrast, OPEC, in its July 13th report, lowered its world oil demand growth forecast for 2026 to 780,000 bpd, marking its third consecutive downward revision. However, OPEC remains more optimistic than the IEA regarding 2027, anticipating a global oil demand increase of 1.94 million bpd. Despite OPEC's outlook, the IEA's prediction of a demand decrease in 2026 underscores the market's sensitivity to Middle Eastern energy trade stability.