The International Energy Agency (IEA) has substantially revised its 2026 global oil demand forecast downwards, now expecting a decline of $1.6 million barrels per day (mb/d). This is $510,000 barrels per day more than their previous estimate, primarily attributed to the continued closure of the Strait of Hormuz and persistently high fuel prices impacting consumption. The IEA anticipates demand contractions to ease from $4.9 mb/d in Q2 2026 to $2.8 mb/d in Q3 2026, before returning to growth in the final quarter, with an expansion of $2.4 mb/d projected for 2027. Elevated fuel prices are causing consumers and businesses to reduce their oil consumption, leading to a perceived drop in demand, which typically results in lower prices if supply can meet it.
Global oil supply, despite rising by $2.4 mb/d to $101.5 mb/d in July, remains $6.3 mb/d below year-ago levels, with $8.3 mb/d of Gulf output still shut in. The IEA has further slashed its 2026 global oil supply forecast by $4.3 mb/d on average, a $600,000 bpd deeper cut than a month prior, citing renewed hostilities and maritime disruptions in July and early August. This reduction in supply estimates is directly linked to the unresolved conflict and the closure of the Strait of Hormuz and Bab Al Mandeb strait, which have restricted about a fifth of the world's oil supply from reaching markets. The IEA predicts global supply to rebound by $8.3 mb/d in 2027 to $110.3 mb/d.
Refinery crude throughputs also saw a decline, remaining nearly $5 mb/d below year-earlier levels at $80.9 mb/d in July, with continued Middle East product export disruptions and attacks on Russian refineries further reducing Q3 2026 estimates by $370,000 bpd. The global oil balance is now projected to show a deficit of $1.8 mb/d in Q3 2026, more than double the previous estimate of $800,000 bpd. Global observed oil inventories plunged by $69 million barrels in July, predominantly due to a drop in oil on water, with total stocks falling below $7.9 billion barrels for the first time since April 2025. Cumulative stock draws since the end of February reached $410 million barrels.
Benchmark crude oil prices experienced significant volatility in July, trading in an exceptionally wide range of almost $40 per barrel, driven by geopolitical developments. North Sea Dated rose by $25.67 per barrel over July, ending the month at $96.80 per barrel and trading around $92 per barrel at the time of reporting. U.S. crude oil (West Texas Intermediate) was hovering around $81, down from $83.50 earlier in the week. OPEC also lowered its world oil demand growth forecast for 2026 to $380,000 barrels per day, marking its fifth consecutive downward revision, from a previous estimate of $580,000 barrels per day, as escalating attacks on Gulf shipping pushed Brent crude prices past $100 a barrel.
