IEA lowered oil demand forecast despite resumption of supplies from the Persian Gulf
The International Energy Agency (IEA) worsened its forecast for the recovery of global oil demand in 2027 amid high fuel prices and deteriorating economic prospects. At the same time, despite a significant increase in crude oil exports from the Persian Gulf countries, supplies of refined petroleum products remain well below pre-war levels. This supports the shortage of fuel on the world market and increases pressure on the economy.
This is stated in the October report of the International Energy Agency Oil Market Report, published on October 14.
The IEA expects that in 2027, global oil consumption will increase by 2 million barrels per day. This is 600 thousand barrels less than the agency forecast in September, when it expected demand to recover by 2.6 million barrels per day.
The reasons for the revision were the consequences of the war with Iran, in particular limited availability of petroleum products, high fuel prices and deterioration of economic prospects in a number of countries.
Global oil demand is shrinking
According to new IEA estimates, in 2026 global oil demand will decrease by 2.6 million barrels per day to 102.4 million barrels per day.
In its September report, the agency expected a slightly smaller decline of 2.5 million barrels per day.
The greatest decline in consumption occurred in the second quarter of 2026, when global demand decreased by 5 million barrels per day compared with the same period last year.
In the third quarter, the decline slowed to 3.7 million barrels per day. In the fourth quarter, the agency forecasts a further decline of 2.5 million barrels per day year on year.
Even the expected recovery in 2027 will not allow global oil consumption to return to 2025 levels. According to IEA calculations, demand will remain 620 thousand barrels per day, or 0.6%, lower than the level of two years earlier.
Approximately a quarter of the total reduction in demand in 2026 will be attributable to diesel fuel, consumption of which is closely linked to industry, freight transport and other economic activities.
The agency emphasizes that record diesel prices are already affecting the cost of goods, purchasing power of the population, economic activity and inflation.
Oil exports from the Persian Gulf are recovering
Despite worsening demand forecasts, global crude oil supply has begun to recover after massive disruptions caused by military actions in the Middle East.
According to IEA data, in September crude oil exports from the Persian Gulf countries increased by 4.4 million barrels per day to 13.9 million barrels. This is over 75% of the level observed before the start of the war with Iran.
The main factor in the recovery was the increase in supplies from Saudi Arabia. Countries in the region also made greater use of accumulated stocks and alternative oil transportation routes.
In particular, total oil flows through the Strait of Hormuz increased by 3.7 million barrels per day in September to 10.9 million.
At the same time, volumes of exports bypassing the strait increased by 970 thousand barrels per day to 5.6 million. This was facilitated by the restoration of the Saudi East-West pipeline, which allows transporting oil to Red Sea ports.
Against the background of increased supplies from the Persian Gulf countries, global oil supply in September increased by 2.5 million barrels per day compared with August to 102.3 million barrels.
However, the agency warns that further recovery remains fragile due to new attacks on energy infrastructure and tanker shipping in the region.
There is still a shortage of refined products on the world market
The main problem is that the recovery of crude oil supplies is taking place much faster than exports of refined petroleum products.
In September, the Middle East countries exported only 1.9 million barrels of petroleum products per day, compared with 4.7 million before the war. Thus, volumes remain at about 40% of pre-war levels.
Over the month, oil product exports increased by only 210 thousand barrels per day—much slower than crude oil exports.
A similar situation is observed in the liquefied petroleum gas (LPG) market. Its supplies from the Middle East in September amounted to 670 thousand barrels per day, although before the war they reached 1.5 million.
Due to disruptions in exports from the Middle East, as well as reduced supplies from Russia and some Asian countries, the global availability of diesel and gasoil in the third quarter was 1.7 million barrels per day lower than a year earlier.
According to preliminary data, global exports of diesel and gasoil in September decreased by almost 700 thousand barrels per day compared with a year earlier.
The situation is exacerbated by a reduction in the production of petroleum products in Russia due to damage to oil refineries as a result of Ukrainian strikes. The IEA notes that the reduction in Russian supplies has worsened the deficit caused by the war in the Middle East.
Fuel prices remain high
Limited supply of petroleum products has kept prices high even despite a partial recovery in global production and exports of crude oil.
In September, wholesale diesel prices in Singapore exceeded $200 per barrel, and in Europe and the United States they reached record levels around $220.
Quotations later declined, but, according to IEA estimates, diesel remains almost twice as expensive as crude oil and is approximately twice the pre-crisis level.
At the same time, crude oil itself is getting more expensive. According to the agency at the time of the report, Brent futures traded near $107 per barrel, while the physical North Sea Dated indicator reached about $134.
Record costs for sea transportation further increase the cost of supplying raw materials and reduce the profitability of refineries in Europe and Asia.
The IEA warns that further deterioration in profitability could force individual enterprises to reduce refining volumes, further exacerbating the situation on the refined products market.
Deficit may persist into next year
Despite the reduction in global demand, the IEA expects the overall balance of the oil market to remain in deficit until the end of 2026.
According to agency estimates, global oil stocks at the end of September were 509 million barrels lower than at the end of February, before the start of the war with Iran. Stocks on land are near their lowest levels since at least 2016.
The diesel market situation may remain tight for much longer.
The IEA forecasts that in the first quarter of 2027, the balance of diesel and gasoil could return to surplus, but this will not be enough to quickly rebuild stocks depleted during 2026.
The agency considers a significant replenishment of stocks outside of normal seasonal fluctuations unlikely before the second half of 2027.
The further development of the situation will depend largely on the restoration of oil product exports from the Middle East and the security of sea transport.
Thus, the global oil market finds itself in a situation where high prices restrain consumption, but even reduced demand does not eliminate shortages of certain types of fuel. The restoration of production and exports of crude oil from the Persian Gulf has not yet ensured a corresponding increase in supplies of petroleum products, preserving risks for the global economy.
Sources: International Energy Agency - October report, IEA - September report