The International Energy Agency now expects global oil demand to fall by 2.5mn barrels a day this year, a sharper drop than it previously forecast. The agency also pushed back its timeline for the Strait of Hormuz to reopen, saying the key shipping route will stay restricted through 2026 because of the impasse between the US and Iran.
Last month the IEA said demand would fall by about 1.6mn barrels a day in 2026, with flows through the strait expected to normalize before year-end. Instead, the agency now projects a steeper 2.5mn barrel-a-day drop this year, blaming the impasse in talks between the US and Iran for keeping shipping through the strait restricted throughout 2026.
Average oil demand is set to recover by just 2.6mn barrels a day in 2027, only marginally above 2025 levels, the agency said. According to the IEA: "This would render 2026-27 essentially a lost period for oil demand growth".
Brent surges past $110 before easing back
Brent crude surged as much as 14% this week to trade at almost $110 a barrel on Friday, its highest level since May, before falling back to about $105. Prices for refined products such as diesel have also jumped, as refining capacity has been curtailed in the Gulf and by Ukrainian strikes on Russian refineries.
The IEA expects oil product prices to rise further still. Higher refined product prices are, in turn, expected to erode oil demand as price-sensitive buyers cut back usage.
Supply also tightens sharply
On the supply side, global oil production fell 1.6mn barrels a day to just over 100mn barrels a day in August, with more than 10mn barrels a day of Gulf output still shut in. The IEA said overall oil supply will fall 5.7mn barrels a day this year, with the expected recovery in Gulf output now deferred until 2027.
Ukraine's attacks on Russian infrastructure also crimped the country's exports, cutting them by 410,000 barrels a day in August to their lowest level since 2018.
Source: Financial Times
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