The International Energy Agency (IEA) further lowered its global oil demand forecast for 2026, warning that the closure of the Strait of Hormuz following the U.S.-Iran conflict continues to disrupt energy markets. In contrast, the Organization of the Petroleum Exporting Countries (OPEC) maintained its demand outlook despite persistent uncertainty in the Middle East.
WTI crude oil futures edged lower during early New York trading after rallying for three consecutive sessions, as traders assessed developments surrounding the Iran conflict alongside ongoing diplomatic efforts aimed at ending the war.
The Paris-based IEA, an autonomous intergovernmental body established in 1974, said global oil demand is now expected to contract by 420,000 barrels per day (kb/d) in 2026 to 104 million barrels per day (mb/d), marking a downgrade of 1.3 mb/d from its pre-war forecast.
Sharpest Demand Hit Seen in Second Quarter
The agency expects the steepest decline in demand during the second quarter, when consumption is projected to fall by 2.45 mb/d. OECD economies are estimated to account for a 930 kb/d decline, while non-OECD nations are expected to see a larger 1.5 mb/d drop.
According to the IEA, elevated oil prices, slowing economic activity and fuel-saving measures are likely to weigh further on fuel consumption.
Supply Losses Deepen as Hormuz Closure Continues
On the supply side, the IEA said global oil production fell by another 1.8 mb/d in April to 95.1 mb/d, taking cumulative supply disruptions since February to 12.8 mb/d.
Output from Persian Gulf producers remained 14.4 mb/d below pre-war levels, although higher exports from the Atlantic Basin partly offset the shortfall.
Assuming flows through the Strait of Hormuz begin to gradually resume from June, the agency projects global oil supply to decline by an average 3.9 mb/d in 2026 to 102.2 mb/d.
Refinery Activity and Inventories Under Pressure
The IEA also expects refinery crude throughput to plunge by 4.5 mb/d in the second quarter to 78.8 mb/d and decline by 1.6 mb/d for the full year.
Preliminary estimates showed global oil inventories dropped by 129 million barrels in March and a further 117 million barrels in April amid persistent supply disruptions.
Even if shipments through Hormuz resume in the third quarter, supply recovery is likely to remain gradual, the agency said, adding that “the oil market remains in deficit until the final quarter of the year.”
The IEA also warned of heightened price volatility ahead of the peak summer demand season as inventories continue to decline at a record pace.
OPEC Maintains More Optimistic Demand Outlook
Meanwhile, OPEC’s latest monthly report painted a comparatively resilient demand outlook. The producer alliance expects global oil demand to grow by 1.2 mb/d in 2026, driven largely by non-OECD economies, which are projected to contribute 1.1 mb/d of growth, while OECD demand is expected to rise by a modest 0.1 mb/d.
OPEC also left its forecast for non-Declaration of Cooperation (non-DoC) supply growth unchanged at 0.6 mb/d for 2026, with Brazil, the United States, Canada and Argentina expected to lead production gains.
Reflecting the impact of the Hormuz disruption, crude production among Declaration of Cooperation (DoC) participants fell by 1.74 mb/d in April to an average of 33.19 mb/d.
Global Growth Forecasts Left Unchanged
Despite ongoing geopolitical tensions and supply disruptions, OPEC maintained its global economic growth forecasts for 2026 and 2027 at 3.1% and 3.2%, respectively.
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