The International Energy Agency has just published its monthly Oil Market Report, taking down its global oil demand forecast down further to -420kb/d decline in 2026 as the Strait of Hormuz remains closed. In the report, the IEA assumes oil flows through the Strait gradually resume from June 2026.
The report points to cumulative supply losses from Gulf producers of more than 1 billion barrels, offset somewhat by higher exports from the Atlantic Basin (US, Canada, Brazil and others elsewhere including Russia). For the year as a whole, the IEA now expects global oil supply to decline by -3.9mb/d on average in 2026 compared to 3.1mb/d of supply growth in 2025.
The IEA points to c. 4mb/d equivalent of inventory draw since the start of the conflict. However, given the c. 10mb/d of supply loss, we expect that it''s highly unlikely that a 5-6mb/d of demand destruction has gone unnoticed by the economy - for some context, c. 2mb/d of oil demand was lost during the Global Financial Crisis. We therefore expect the IEA''s inventory figures are not reflective of the full picture, likely due to incomplete non-OECD data. Our estimates point to nearer 8mb/d of inventory draws, with the balance met by the release of some strategic reserves as well as some demand rationing.
Demand:
. As the Middle East conflict continues, the IEA now forecasts global oil demand to fall by 420kb/d in 2026, 1.3mb/d lower than the IEA''s pre-war forecast and down from 770kb/d actual growth in 2025.
. Global oil demand is expected to contract the most in 2Q26, by 2.4mb/d, according to the IEA
. The petrochemicals and aviation sectors at the centre of this demand downgrade: led by lower demand for naphtha, LPG and jet fuel in Middle East and Asia Pacific regions.
. The IEA says that European aviation activity is running well below normal levels - Eurocontrol data show a 2.1% y-o-y contraction in regional April flights vs a 2.6% increase in flights during January and February, and a 5.2%...
