Ndubuisi Francis in Abuja
Global oil demand is now forecast to decline by 1.0 million barrels per day (mbpd) in 2026, compared with the previous estimate of 1.1 mbpd, the International Energy Agency (IEA) has said in its latest monthly Oil Market Report (OMR).
The agency now expects total world oil supply to average 860,000 barrels per day below demand in 2026, an improvement over its previous estimate of a 920,000 bpd shortfall.
According to the IEA, world oil supply will fall by 3.7 mbpd in 2026 lower than 3.9 mbpd in 2025.
For 2027, the agency outlined a more optimistic scenario, assuming shipping conditions through the Strait of Hormuz continue to normalise.
Under that assumption, global oil supply is projected to increase by 7.5 million barrels per day, while demand is expected to grow by around 2.0 mbpd, resulting in a substantial market surplus.
On the contrary, the report explained that escalation of hostilities could upend the 2027 surplus outlook, adding that any disruption to transit through the Strait of Hormuz or broader regional instability could significantly tighten global oil balances and eliminate the projected surplus.
The report noted that global oil supply rebounded sharply in June, rising by 4.1 million barrels per day as tanker traffic through the Strait of Hormuz resumed following recent disruptions.
Despite the recovery, worldwide production remained 9.4 mbpd below pre-war levels, underscoring the lasting impact of the conflict on global energy markets.
The IEA report also noted that refined product cracks and margins surged to four-year highs in early July, as increased crude supplies pushed oil prices sharply lower, while product markets remained tight.
Global refinery runs rose by 1.5 mbpd in June, down 6 mbpd year-on-year, with Middle East export refineries yet to restart, Russian throughputs curtailed by attacks and Asia still running at reduced rates.
Global runs are expected to decline by 2.4 mbpd this year and rebound by 3.1 mb/d in 2027.
IEA further revealed that global observed oil inventories rose for the first time in four months in June, by 21 million barrels, as sharply higher oil on water volumes more than offset continued draws in onshore tanks.
“Following a decline of 73 mb in May, total OECD stocks fell by a further 62 mb in June, of which an estimated 44 mb came from government stock releases. Non-OECD crude stocks eased by 37 mb in June, led by a 41 mb draw in China.
“Benchmark crude oil prices continued to spiral lower in June, erasing all of their wartime gains, as tanker traffic out of the Gulf picked up and market focus shifted to the prospect of oversupply.
“North Sea Dated crude plunged by $22/bbl m-o-m, to around $68/bbl, with prompt time spreads reverting to contango. Prices rose after the ceasefire agreement was breached on 7-8 July, with Dated trading around $77/bbl,” the report said.
The IEA unanimously admitted Nigeria as an Association Country on July 2, 2026, making the country the first member of the Organisation of the Petroleum Exporting Countries (OPEC) to join the IEA, as well as the agency’s sixth African member.
The admission process was the fastest in the 52-year history of the IEA, reflecting Nigeria’s strategic role in global energy governance and regional market resilience.