IEA Downgrades 2026 Global Oil Demand Forecast by 940,000 bpd to 2.5 Million bpd Decline, Largest Annual Contraction Since COVID Pandemic

The International Energy Agency sharply downgraded its 2026 global oil demand outlook in its September Oil Market Report, forecasting a 2.5 million barrels per day decline for the year, 940,000 barrels per day steeper than projected in the August report, according to the IEA report published September 11 and covered by Oil & Gas Journal and Trading Economics. The downward revision reflects the continuing impasse in US-Iran negotiations and the ongoing closure of the Strait of Hormuz, which has delayed the prospect of normalizing oil flows into 2027. The IEA said 2026 demand is now forecast at 102.45 million barrels per day, down from 104.95 million barrels per day in 2025, marking the largest annual decline since the COVID-19 pandemic. Demand losses will be concentrated in middle distillates and petrochemical feedstocks, particularly in Asia, where disrupted sulphur supplies through Hormuz have forced China to curb sulphuric acid exports starting in May 2026, creating ripple effects across mineral processing and fertilizer value chains. The IEA's September report also noted that global oil supply averaged 100.7 million barrels per day in 2026, down 5.7 million barrels per day from 2025 and 1.3 million barrels per day below the previous forecast, with the agency pushing its expected recovery in Gulf production into 2027. Gulf oil supply fell 2 million barrels per day in August to 21.9 million barrels per day, or 10.1 million barrels per day below prewar levels, while shipments through the Strait of Hormuz declined to 7.6 million barrels per day. Global observed oil inventories plunged by 95 million barrels in August, taking cumulative draws since February to 507 million barrels, or 2.8 million barrels per day on average, as oil on water volumes declined by 65 million barrels due to renewed attacks on tanker traffic out of the Middle East. Benchmark North Sea Dated crude prices rose by $7.61 per barrel to an average of $91.00 per barrel in August before surging to $1