Demand Forecast Revision
The International Energy Agency (IEA) reduced its 2026 global oil demand outlook by 1.1 million barrels per day, a sharp downgrade from its prior estimate of a 420,000‑barrel‑per‑day decline. The revision reflects the impact of high oil prices and severe supply disruptions stemming from the Gulf conflict.
Supply Outlook
The IEA projects that global oil supply will fall by 3.9 million barrels per day in 2026, with roughly one‑fifth of the world’s oil supply trapped in the Persian Gulf. Supply is expected to rebound to 8 million barrels per day by 2027 as mines are cleared from main shipping lanes and supply chains normalise. For 2027, the agency forecasts demand growth of 2 million barrels per day as trade flows normalise, oil prices decline and economic conditions improve.
Production and Export Impacts
Global oil output in May was 13.6 million barrels per day below pre‑war levels. Exports from Gulf producers fell by 1.1 million barrels per day, leaving them nearly 15 million barrels per day below February levels.
Inventories and Stock Draws
Observed global oil inventories contracted by 143 million barrels in May, bringing the average pace of stock draws since the conflict began to 3.8 million barrels per day. OECD government inventories fell by 163 million barrels, reaching their lowest level since December 1990.
Price Movements
Brent crude slipped below $80 a barrel on Wednesday and fell more than 8 % over the week, trading at its lowest level since early March. U.S. West Texas Intermediate (WTI) traded around $76 a barrel.
Geopolitical Context
The United States and Iran reached a preliminary agreement to end hostilities, with a formal signing expected on Friday. The IEA noted the deal as the most significant breakthrough in negotiations since the war began, describing it as an encouraging step while cautioning that full recovery will not be immediate.