The International Energy Agency cut its 2026 global oil supply forecast on Wednesday to 102 million barrels per day, a decline of 4.3 mb/d on the year, as the breakdown of the U.S.-Iran ceasefire reverses a nascent recovery in Gulf output and drives the world deeper into an oil market deficit. The revision marks a significant deterioration from the 3.7 mb/d supply drop the IEA projected in its July report. Gulf production had been climbing through June and into early July, with Middle East loadings touching 20 mb/d at the month's outset, only to retreat to roughly 12 mb/d as the Hormuz waterway effectively closed again and attacks on tankers and energy infrastructure resumed, the IEA said.
The region's output was still 8.3 mb/d short of where it stood before the war in July, though that gap had narrowed from a peak shortfall of 14 mb/d at the height of the fighting. The IEA now expects the global oil market to show a deficit of 1.8 mb/d in the third quarter of 2026, more than double the roughly 800,000 bpd shortfall it estimated last month. A draw of 69 million barrels in July brought total observed global oil inventories under 7.9 billion barrels, a level last seen in April 2025.
Cumulative stock draws since the start of the war have reached 410 million barrels, the agency said. The supply crunch is also weighing on demand. The IEA now forecasts global oil demand to contract by 1.6 mb/d in 2026, a steeper drop than the roughly 1 mb/d decline it projected in July.
Tightened refined-fuel availability and elevated prices are squeezing consumption, with naphtha and gasoil seeing the steepest losses and the sharpest year-on-year declines concentrated in Asia and the Middle East, according to . The IEA projects demand will return to growth in the fourth quarter of 2026, expanding by 580,000 bpd, and rebound by 2.4 mb/d in 2027. Constrained refining is compounding the problem.
Global refinery crude throughputs in July remained nearly 5 mb/d below year-earlier levels. Russian crude processing stayed near 3.9 mb/d in July — close to its weakest in two decades — after Ukrainian drone strikes targeted refineries across the western side of the Urals, the IEA said, and the resulting disruption pushed Russian fuel exports down to 1.4 mb/d, roughly half of what the country shipped a year earlier. The squeeze on product supply pushed Atlantic Basin refining margins to levels not previously recorded.
The IEA's prior outlook had rested on a partial reopening of the Strait of Hormuz that briefly stabilized conditions in June. The two sides signed a memorandum of understanding on June 17, but the agreement unraveled almost immediately, and the standoff has since deepened. Iran has insisted the U.S. must meet broad conditions — including sanctions relief and an end to its naval blockade — before the waterway can reopen, while Washington has continued to apply pressure through the blockade rather than additional airstrikes.
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