The International Energy Agency (IEA) has reported that global oil demand is plummeting at its fastest rate since the pandemic. This significant contraction is attributed to a confluence of factors including elevated oil prices, a worsening economic environment, and active demand-saving measures implemented by governments and companies. For the year 2026, global oil demand is projected to decline by an average of 1.6 million barrels per day (mb/d), a substantial revision from earlier forecasts.
Specifically, the second quarter of 2026 saw a projected contraction of 4.9 mb/d, followed by a 2.8 mb/d decline in the third quarter. The steepest losses are primarily observed in the petrochemical sector, which faces increasing feedstock availability constraints, and in the aviation industry, where activity remains well below normal levels due to skyrocketing jet fuel prices. These prices nearly tripled after Middle Eastern exports were disrupted, impacting airline operations, leading to fare increases and flight cancellations.
The IEA initially forecast a modest growth of 730,000 barrels per day for 2026, but this has been revised multiple times. In May 2026, the IEA predicted a contraction of 420,000 barrels per day (kb/d) for the year, which was 1.3 mb/d weaker than their pre-conflict forecast. This decline was heavily influenced by a 2.4 mb/d year-on-year contraction in the second quarter. The agency noted that demand might rebound towards the end of the year if a resolution to the conflict allows for the resumption of flows through the Strait of Hormuz, which is assumed to gradually occur from the third quarter of 2026. However, even with a potential demand recovery, supply is expected to be slower to rebound, leaving the oil market in a deficit until the final quarter of the year, potentially leading to further price volatility.
