The International Energy Agency warns that global oil supply and demand forecasts have been revised downward due to ongoing conflicts in Iran and Ukraine.
The International Energy Agency warned that the global oil refining system is stretched to the limit due to the pressure from the Iran and Ukraine wars. The agency revised its global oil supply and demand projections for the remainder of the year, noting that a full recovery in flows from Middle East producers has been deferred until next year as the conflict in Iran drags on.
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The International Energy Agency expects world oil supply to decline by 5.7 million barrels per day in 2026, which is a 6% lower figure than the 2025 projection. Global oil demand is expected to fall by 2.5 million barrels per day this year, a larger decline than the previous August forecast of 1.6 million barrels per day. The agency attributed these shifts to an impasse in diplomatic talks between the U.S. and Iran, which delays a truce. This delay is compounded by renewed attacks on tankers in the Strait of Hormuz and the Red Sea's Bab el-Mandeb choke point. The International Energy Agency stated that inventories have played a crucial role in balancing the market, but as buffers shrink, progress in resolving the Middle East and Russia-Ukraine conflicts is necessary to avoid further market tightening and demand destruction.