World oil demand has been forecast by the International Energy Agency to decline by 1.6 mb/d in 2026, 510 kb/d more than its estimate in last month’s Report, as the ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption.
Annual contractions will nevertheless ease from 4.9 mb/d in 2Q26 to 2.8 mb/d in 3Q26, before returning to growth in the final quarter. Global oil demand is projected to expand by 2.4 mb/d in 2027.
Global oil supply rose by 2.4 mb/d to 101.5 mb/d in July, but remained 6.3 mb/d below year-ago levels, with 8.3 mb/d of Gulf output still shut in. Renewed hostilities and maritime disruptions in July and early August undermined the recovery efforts, reducing projected 3Q26 oil supply by 1.7 mb/d compared with last month’s Report. Global oil supply is now projected to decline by 4.3 mb/d on average in 2026 and rebound by 8.3 mb/d next year to 110.3 mb/d.
Refinery crude throughputs increased further in July but remained nearly 5 mb/d below year earlier levels, at 80.9 mb/d. Continued Middle East product export disruptions and attacks on Russian refineries reduced 3Q26 runs estimates by a further 370 kb/d. Global throughputs are now forecast to decline by 2.5 mb/d on average in 2026 and rebound by 3.5 mb/d in 2027. Tighter light and middle distillate markets boosted cracks and margins in the Atlantic Basin to record highs.
Global observed oil inventories plunged by 69 mb in July, as renewed disruptions to exports from the Gulf and the Caspian Sea resulted in sharply lower volumes of oil on water. Onshore stocks declined by a modest 6 mb, as the pace of IEA emergency stock releases slowed, and despite continued draws in Chinese crude oil stocks. At just below 7.9 billion barrels, total observed oil stocks were down by 410 mb since the start of the war, or by 2.7 mb/d on average.
Benchmark crude oil prices traded in an exceptionally wide range of almost $40/bbl in July, intermittently led by geopolitical developments and tightening crude and product markets. In parallel, prompt differentials for WTI and Brent futures returned to backwardation. North Sea Dated rose by $25.67/bbl over July to end the month at $96.80/bbl and at the time of writing was trading around $92/bbl.
(Dreamstime tanker photo)