Global oil demand to fall by 2.6 million barrels per day in 2026, says IEA

Global oil demand is expected to decline by 2.6 million barrels per day (mb/d) in 2026, with diesel accounting for 25 per cent of the fall, as the Iran war disrupts fuel supplies, pushes up prices and weakens the economic outlook, according to the International Energy Agency (IEA).

In its October oil market report, the IEA said global oil demand is forecast to fall by 2.5 million barrels per day year-on-year in the fourth quarter of 2026. Fuel shortages, rising costs and deteriorating economic conditions are expected to weigh on consumption.

The agency expects global oil demand to recover by 2 million barrels per day in 2027. However, consumption will remain 620,000 barrels per day, or 0.6 per cent, below 2025 levels.

Global oil supply rises in September

Global oil supply increased by 2.5 million barrels per day month-on-month to 102.3 million barrels per day in September, driven largely by higher output from Gulf producers, the IEA said.

Output from OPEC+ countries rose by 2.1 million barrels per day, led by Saudi Arabia. The United Arab Emirates accounted for most of the increase among producers outside the group.

However, the agency expects global oil supply to decline by an average of 5.8 million barrels per day to 100.7 million barrels per day in 2026 before rebounding by 7.7 million barrels per day in 2027.

More from Business

The IEA cautioned that renewed attacks in the Gulf have left the expected recovery fragile, highlighting the risks posed by continuing geopolitical tensions.

Refinery margins under pressure

Higher shipping costs and crude oil prices have squeezed refinery margins in Europe and Asia. In contrast, access to discounted crude has helped push US refinery margins to record highs.

Global refinery processing is expected to fall to a seasonal low of 81.3 million barrels per day in October before recovering to 84.6 million barrels per day by the end of the year, according to the report.

For the full year, global refinery runs are projected to decline by 2.3 million barrels per day to 81.7 million barrels per day in 2026. The IEA expects processing volumes to increase by 2.8 million barrels per day in 2027.

Diesel supplies tighten as inventories fall

Global diesel markets remain under pressure as prolonged supply disruptions force countries to draw down inventories ahead of peak winter demand.

Diesel exports worldwide fell by 700,000 barrels per day year-on-year in September. A combined decline of 1.3 million barrels per day in supplies from Russia and the Middle East was only partially offset by higher exports from other regions.

Global observed oil inventories declined by 10 million barrels in September, as a 113-million-barrel reduction in onshore stocks was largely offset by an increase in oil held in transit.

Crude inventories in non-OECD economies fell by 76 million barrels, with China accounting for 78 per cent of the decline. Inventories in OECD countries dropped by 37 million barrels.

Overall, global oil stocks were 509 million barrels lower than at the end of February, equivalent to a decline of 2.4 million barrels per day over the period, the IEA said.