International Energy Agency or IEA stated in a monthly update that global crude oil demand is forecast to decline by 1.1 mb/d y-o-y in 2026. This represents a downgrade of 700 kb/d compared with our May Report, as 2Q26 deliveries plunged by 5 mb/d y-o-y in the face of higher fuel prices and disruptions to product availability. IEA sees growth rebounding to 2 mb/d in 2027, as a normalisation of trade flows, lower oil prices and an improving economic outlook contribute to the recovery.

Global supply is set to fall by 3.9 mb/d to 102.4 mb/d in 2026 before rebounding by 8 mb/d to 110.3 mb/d in 2027. In May, output declined to 94.5 mb/d, down 600 kb/d m‑o‑m and 13.6 mb/d below pre‑conflict levels. While the US‑Iran interim agreement paves the way for a rebound in Middle East exports, operational and political constraints, including prolonged demining and unresolved transit arrangements, leave downside risks to the outlook.

Refinery crude throughputs are forecast to contract by 2 mb/d in 2026 to 82 mb/d, led by a 4.7 mb/d y-o-y decline in 2Q26. Notwithstanding the interim peace deal, 2026 crude runs estimates are cut by 370 kb/d on the back of much steeper cuts in 3Q26 estimates across China, the Middle East, Eurasia and non-OECD Asia. Runs are expected to rebound by 3.1 mb/d in 2027, as crude supplies normalise to an average of 85 mb/d.

IEA noted that the decline in global observed inventories accelerated in May, to 143 mb (-4.6 mb/d) from 74 mb (-2.5 mb/d) in April. OECD government inventories also fell by 163 mb (-1.8 mb/d) over the same period to their lowest level since December 1990 as the pace of emergency stock releases accelerated.

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