IEA forecasts 1.6 mb/d oil demand drop as Hormuz closure bites

Global oil demand is forecast to contract by 1.6 million barrels per day (mb/d) in 2026 as the continued closure of the Strait of Hormuz and high fuel costs suppress consumption, according to the International Energy Agency (IEA). The Paris-based agency released its August Oil Market Report on Wednesday, 12 August, revealing a deeper decline than previously estimated. Strait of Hormuz closure impacts consumption The IEA report indicates that the annual contraction in demand will ease from 4.9 mb/d in the second quarter of 2026 to 2.8 mb/d in the third quarter. Despite the current downturn, the agency expects a return to growth in the final quarter of the year, with a projected expansion of 580,000 barrels per day. Looking ahead to 2027, global demand is expected to rebound significantly, growing by 2.4 mb/d. The global oil balance is currently facing a deficit of 1.8 mb/d for the third quarter of 2026, which is more than double the IEA's July estimate of 800,000 barrels per day. This supply gap follows a sharp plunge in global inventories, which fell by 69 million barrels in July. Total observed stocks have now dropped below 7.9 billion barrels, reaching their lowest levels since April 2025. Supply projected to rebound in 2027 Global oil supply is forecast to fall by 4.3 mb/d in 2026 to an average of 102 mb/d. While production growth in the Americas is contributing 1.4 mb/d, it remains insufficient to offset substantial losses in the Middle East and Russia. However, the IEA…