The International Energy Agency now expects global oil demand to fall by 1.6 million barrels a day in 2026, well above its July estimate, as the Strait of Hormuz closure keeps disrupting supply. Global oil inventories fell below 7.9 billion barrels in July for the first time since April 2025, while Brent crude trades just under $90 a barrel.
The International Energy Agency raised its 2026 oil demand-drop forecast to 1.6 million barrels a day on Wednesday, citing the deepening impact of the Strait of Hormuz closure. That is 510,000 barrels a day more than its July prediction. High fuel prices continue to weigh on consumption, though the IEA expects demand to pick up through the year and return to growth in the fourth quarter.
Hormuz talks remain stalled
An agreement between Washington and Tehran to reopen the strait has not emerged, with both sides continuing to publicly issue demands. The IEA said renewed hostilities and maritime disruptions are undermining efforts to boost global oil supply, which stayed 6.3 million barrels a day lower year-on-year in July. The volatility has pushed Brent crude from above $100 a barrel last month to near $70 a barrel, before it settled just under $90 a barrel.
Inventories are rapidly depleting
Fears of a globally destabilizing shortage when the strait closed in March have not materialized, thanks to a sharp decline in Chinese imports, the use of alternative shipping routes, and a drawdown of inventories. Data this week showed U.S. crude oil stockpiles have fallen below 300 million barrels, the lowest level in more than four decades. The IEA said global observed oil inventories fell below 7.9 billion barrels in July for the first time since April 2025.
According to the IEA: "risks remain substantial and the urgency of reopening the Strait has increased", even though the market is projected to return to surplus toward the end of this year.
Refiners and consumers feel the squeeze
Traders keep bidding up crude on any signal that a deal may be close, but refining capacity — which sets the price of gasoline and diesel — has become heavily constrained. The International Monetary Fund cut its annual economic growth forecast to 3% from 3.3% since the Iran war broke out in February. IMF managing director Kristalina Georgieva said earlier this year that the war has pushed prices higher and growth lower.
Source: US Top News and Analysis
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