In its latest Oil Market Report (OMR), published today, the IEA said the global oil demand is now expected to decline by 420,000 barrels per day in 2026, averaging 104 million barrels per day, which is 1.3 million barrels per day lower than pre-war forecasts. The sharpest drop is projected for the second quarter of 2026, driven mainly by reduced activity in petrochemical and aviation sectors, along with weaker economic conditions, higher prices, and energy-saving measures.
Global oil supply fell by another 1.8 million barrels per day in April to 95.1 million barrels per day, bringing total supply losses since February to 12.8 million barrels per day. Countries affected by the closure of the Strait of Hormuz experienced especially severe disruptions, with Gulf output dropping 14.4 million barrels per day below pre-war levels. Although increased production from the Atlantic Basin has partially offset the losses, global supply for 2026 is still expected to average 102.2 million barrels per day, down 3.9 million barrels per day year-on-year.
Refinery activity has also been heavily impacted. Global refinery crude throughput is forecast to plunge by 4.5 million barrels per day in the second quarter of 2026 and decline by 1.6 million barrels per day over the full year due to infrastructure damage, export restrictions, and limited feedstock availability. Despite this, refining margins remain historically high because of strong middle distillate demand.
Oil inventories are being depleted rapidly. Global observed inventories fell by 129 million barrels in March and another 117 million barrels in April. OECD onshore stocks saw particularly sharp declines. At the same time, tanker traffic through the Strait of Hormuz remains severely restricted, with more than 14 million barrels per day of Gulf oil production currently shut in.
Oil prices have experienced extreme volatility. North Sea Dated crude averaged over $120 per barrel in April after surging sharply due to Middle East disruptions, although prices later retreated below $100 before rebounding again to around $110 per barrel amid uncertainty over a possible U.S.-Iran agreement.
To compensate for supply disruptions, Saudi Arabia and the UAE have rerouted some exports outside Hormuz, while strategic reserves from consuming countries have been released into the market. Producers in the Americas have also increased output and exports significantly. Meanwhile, major Asian importers such as China, Japan, South Korea, and India sharply reduced crude imports as refinery activity slowed.
Demand destruction is becoming increasingly visible. Petrochemical feedstock shortages and reduced aviation activity have significantly lowered consumption, while high prices and economic weakness continue to suppress fuel demand globally. Analysts expect the market to remain undersupplied until late 2026 unless a political agreement allows the gradual reopening of the Strait of Hormuz and restoration of regional oil flows.