OPEC on Wednesday lowered its forecast for world oil demand growth in 2026 to 580,000 barrels per day, down sharply from its prior estimate of 780,000 bpd, marking the fourth consecutive downward revision as the prolonged closure of the Strait of Hormuz continues to weigh on global consumption. The International Energy Agency struck an even more bearish tone, projecting that global oil demand will actually decline by 1.6 million bpd this year.
The OPEC report, part of its monthly oil market update, cited stalled negotiations to reopen the Hormuz shipping lane and continued risks in the Red Sea as primary drivers of the weaker outlook. The Hormuz chokepoint, through which roughly 20% of the world’s oil normally flows, has been disrupted since the Iran-US conflict escalated earlier this year.
IEA Projects First Global Demand Decline in Years
The IEA’s August Oil Market Report painted the starker picture. The agency now expects global oil demand to contract by 1.6 million bpd in 2026, which would be 510,000 bpd more than its previous estimate. Annual contractions are forecast to ease from 4.9 million bpd in the second quarter to 2.8 million bpd in the third quarter, before returning to growth of 580,000 bpd in the final three months of the year.
A total of 8.3 million bpd of Gulf output remains shut in due to the conflict, and the IEA estimated that global oil supply will decline by 4.3 million bpd on average across 2026 before rebounding by 8.3 million bpd next year. The agency noted that global observed oil inventories have fallen by 410 million barrels since late February, a drawdown of approximately 2.7 million bpd, leaving stocks below 7.9 billion barrels for the first time since April 2025.
Refining margins in the Atlantic Basin have surged to record highs as tighter product markets push diesel, jet fuel, and gasoline cracks sharply upward. Global refinery crude throughputs remain nearly 5 million bpd below year-earlier levels, with capacity elsewhere in the system unable to offset the loss of Middle Eastern product exports.
Market Faces Structural Deficit
The global oil balance is now projected to show a deficit of 1.8 million bpd in the third quarter of 2026, more than double the estimate from last month’s report. Crude prices have traded in an exceptionally wide range of nearly $40 per barrel in July alone, swinging between geopolitical optimism and renewed hostilities.
The OPEC report noted that the world economy had shown resilience at the start of the second half of 2025, with economies in India, China and Brazil outperforming expectations, but said elevated fuel prices were now putting downward pressure on oil use across all major consuming regions.
At the time of writing, Brent crude was trading near $92 per barrel while WTI held around $85. Despite the demand weakness, supply constraints continue to support prices well above pre-conflict levels. The OPEC+ group raised crude output by 335,000 bpd in July as part of its plan to gradually unwind production cuts, but much of the group’s capacity remains offline due to the Gulf disruption.
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