IEA Expects World Oil Demand to Fall 2.6 Million Barrels a Day as Diesel Shortage Extends into 2027
The agency says Gulf crude exports recovered to more than three-quarters of pre-war levels in September, but renewed attacks leave supply fragile and diesel prices near double their pre-crisis level.
World oil demand will fall by 2.6 million barrels a day this year, the International Energy Agency said on 14 October, as the Iran war restricts fuel supplies, drives up prices and weakens the economic outlook.
The forecast is in the agency's Oil Market Report for October. It puts average demand for 2026 at 102.4 million barrels a day. Diesel accounts for a quarter of the drop expected in the final quarter of the year.
The IEA forecasts a partial recovery of 2 million barrels a day in 2027. That would still leave global oil use 620,000 barrels a day, or 0.6%, below its 2025 level.
Gulf Exports Rebounded in September
Global oil supply rose by 2.5 million barrels a day in September, to 102.3 million barrels a day. Gulf producers drove the increase. Saudi Arabia led gains of 2.1 million barrels a day among OPEC+ countries, and the United Arab Emirates led the increase outside the group.
Crude exports from Gulf producers rose by 4.4 million barrels a day to 13.9 million barrels a day. The agency said that was more than 75% of pre-war levels.
Total oil flows through the Strait of Hormuz increased by 3.7 million barrels a day to 10.9 million barrels a day, helped by ship-to-ship transfers in the Gulf of Oman. Exports that bypass the strait, including through Saudi Arabia's East-West pipeline, rose to 5.6 million barrels a day.
Shipments of refined products and liquefied petroleum gas from the Middle East have recovered more slowly. Refined product exports were 1.9 million barrels a day in September, compared with 4.7 million barrels a day before the war. LPG exports were 670,000 barrels a day, against 1.5 million barrels a day before the war.
The agency said "the recent escalation in attacks on regional energy infrastructure and tanker traffic is threatening to derail further gains". Citing increased Houthi attacks in October, it left its supply projections for the rest of the year largely unchanged.
It expects global supply to fall by an average of 5.8 million barrels a day this year, to 100.7 million barrels a day, before rising by 7.7 million barrels a day in 2027.
Prices and Stocks
North Sea Dated crude rose by US$26.17 a barrel in September to average US$116.89. The IEA linked the rise to renewed Middle East hostilities, faster buying by Asian refiners, the 11 September bombing of the East-West pipeline and a sharp rise in freight rates.
When the report was written, Dated crude was trading around US$134 a barrel, up 43% since the start of September. Brent crude futures had risen 13% over the same period, to around US$107 a barrel.
Global observed oil inventories fell by 10 million barrels in September. Stocks on land fell by 113 million barrels, largely offset by a surge in oil at sea. At the end of September, global inventories were 509 million barrels below their end-February level, and stocks on land were at their lowest since at least 2016, according to the agency.
Diesel Under Strain
Wholesale diesel prices exceeded US$200 a barrel in Singapore in mid-September and reached all-time highs of around US$220 a barrel in Europe and the United States. Prices have eased since, but the IEA said diesel benchmarks "remain nearly double the price of crude oil and their pre-crisis levels".
Global diesel and gasoil availability was 1.5 million barrels a day lower than a year earlier in the second quarter and 1.7 million barrels a day lower in the third. Combined net exports from the Middle East and Russia fell to 820,000 barrels a day in September, down more than 60% from a year earlier. The agency attributed lower Russian output partly to Ukrainian drone damage at refineries.
The IEA said replenishing lost gasoil inventories, beyond normal seasonal changes, is unlikely before the second half of 2027.
It forecasts global refinery runs to reach a seasonal low of 81.3 million barrels a day in October and recover to 84.6 million barrels a day by the end of the year. For 2026 as a whole, it expects runs to fall by 2.3 million barrels a day, to 81.7 million barrels a day.
Photo: The Persian Gulf and the Strait of Hormuz, photographed by an astronaut on the International Space Station on 26 September 2023. (photo credit: NASA)
Image source and reuse record: research-notes.json.
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