IEA: Global Oil Demand to Shrink by 420,000bpd Amid M’East Crisis

Global oil demand is projected to contract by 420,000 barrels per day (bpd) in 2026 as the ongoing Middle East conflict continues to disrupt supply flows and trigger extreme volatility in international crude markets, the International Energy Agency (IEA) has said.

In its May Oil Market Report, the Paris-based agency stated that world oil demand will average 104 million bpd this year, which is about 1.3 million bpd lower than its pre-conflict forecast.

The sharpest decline is expected in the second quarter of 2026, when demand is projected to plunge by 2.45 million bpd year-on-year, with the Organisation for Economic Cooperation and Development (OECD) countries accounting for 930,000 bpd of the drop and non-OECD nations contributing 1.5 million bpd.

According to the IEA, the petrochemical and aviation sectors are currently the worst hit, although higher fuel prices, slowing economic growth and energy-saving measures are expected to further weaken consumption in the coming months.

On the supply side, global oil production fell by another 1.8 million bpd in April to 95.1 million bpd, bringing cumulative losses since February to 12.8 million bpd, it said.

The agency disclosed that output from Gulf producers affected by the closure of the Strait of Hormuz was running 14.4 million bpd below pre-war levels, describing the situation as an “unprecedented supply shock”.

Although producers in the Atlantic Basin have ramped up exports to ease shortages, the IEA said it still expects global oil supply to decline by an average of 3.9 million bpd in 2026 to 102.2 million bpd, assuming flows through the Strait gradually resume from June.

Refinery operations have also come under severe pressure, the report stressed, with global crude throughputs forecast to fall by 4.5 million bpd in the second quarter to 78.7 million bpd. For the full year, refinery runs are expected to decline by 1.6 million bpd to 82.3 million bpd amid infrastructure damage, export restrictions and lower crude availability.