Key findings from Zijin Tianfeng Futures indicate global oil demand is expected to decline by 1.6 million barrels per day (b/d) year-on-year in 2026, a downward revision of 510,000 b/d from the previous month's forecast. This is primarily driven by persistent disruptions to shipping through the Strait of Hormuz and elevated fuel prices, which continue to suppress crude oil consumption. However, the pace of the decline is expected to moderate: demand is projected to contract by 490,000 b/d year-on-year in Q2 2026, narrow to 280,000 b/d in Q3, and return to growth in Q4. For 2027, global oil demand is forecast to increase by 240,000 b/d.
Global oil supply in July rose by 240,000 b/d month-on-month to 101.5 million b/d, but was still 6.3 million b/d lower than the same period last year. Approximately 8.3 million b/d of capacity in the Gulf region remains shut in. Renewed geopolitical tensions and ongoing maritime shipping disruptions from July to early August have hampered the pace of production recovery. Consequently, Q3 2026 supply estimates have been revised down by 170,000 b/d from last month's report. Current forecasts suggest global average oil supply will decline by 4.3 million b/d year-on-year in 2026, before rebounding sharply by 8.3 million b/d in 2027 to reach 110.3 million b/d.
Global refinery crude throughput continued to recover in July, averaging 80.9 million b/d, still nearly 500,000 b/d lower than the same period last year. Due to ongoing disruptions to Middle Eastern refined product exports and repeated attacks on Russian refineries, analysts have further reduced their Q3 2026 refinery run estimates by 370,000 b/d. Current projections indicate global refinery crude throughput will average 2.5 million b/d lower year-on-year in 2026, before increasing by 3.5 million b/d in 2027. Tightening supplies of light and middle distillates have pushed cracking spreads and refinery margins in the Atlantic Basin to record highs.
The demand outlook for 2026
Global oil demand is under significant pressure in 2026, with Q2 projected to be the year's trough. The primary drag comes from China, which is expected to see a year-on-year demand decline of 460,000 b/d. In contrast, the United States and Brazil are forecast to see modest growth of 140,000 b/d and 40,000 b/d, respectively. Developed economies like Europe, Japan, and South Korea are expected to experience slight declines. The market is expected to fully recover in 2027, with China becoming the core driver of growth, adding 510,000 b/d year-on-year and completely offsetting the previous year's decline. India and Russia are forecast to contribute growth of 200,000 b/d and 110,000 b/d, respectively, while Canada is the only major economy expected to see a slight decline of 20,000 b/d. This creates a clear pattern of regional demand divergence, with China setting the cycle, the Americas proving resilient, emerging markets adding volume, and developed economies facing sluggish growth.
In 2026, all petroleum product categories are expected to see year-on-year declines due to geopolitical conflicts and high oil prices. Diesel is forecast to suffer the largest decline, down 550,000 b/d, followed by gasoline with a decrease of 320,000 b/d. Jet fuel is expected to show relative resilience, with only a minor decline of 30,000 b/d. As supply chains are restored in 2027, demand is expected to recover across all product categories. LPG and ethane are projected to lead the rebound with an increase of 770,000 b/d, followed closely by diesel with a gain of 530,000 b/d. Gasoline, naphtha, and jet fuel are expected to recover by 350,000 b/d, 320,000 b/d, and 270,000 b/d, respectively. Fuel oil is forecast to see only a modest increase of 49,000 b/d. Despite this broad recovery, demand for naphtha, fuel oil, and other products in 2027 is expected to remain below their 2025 baseline levels. The long-term recovery potential for gasoline is also constrained by the growing substitution of electric vehicles.
The supply story for the second half of 2026
Incremental supply in the second half of 2026 is expected to come primarily from OPEC+. From Q2 2026 to Q2 2027, total global oil production is projected to increase from 96.50 million b/d to 110.32 million b/d. OPEC+ production is forecast to rise sharply from 37.29 million b/d to 47.67 million b/d, making it the core driver of supply expansion in the H2 2026. Among Gulf states, Saudi Arabia, Iraq, and the UAE are the main contributors to this increase. Non-OPEC+ production is expected to rise only modestly, from 59.21 million b/d to 62.65 million b/d, showing weaker growth elasticity. By 2027, OPEC+ and Gulf state production is expected to approach its peak, leaving limited room for further increases, and global supply growth will then depend on a gradual release from non-OPEC+ producers.
In July 2026, Russia led crude oil production among DoC members with 8,887 kb/d, while Saudi Arabia was the top OPEC producer with 7,352 kb/d. Compared to June, several Middle Eastern countries concentrated their capacity releases. Iraq increased output by 665 kb/d, Saudi Arabia by 590 kb/d, and Kuwait by 393 kb/d, with these three countries collectively accounting for the vast majority of the monthly supply increase. Malaysia was the sole exception, cutting production by 223 kb/d due to facility maintenance. Nigeria and the UAE saw slight reductions, while production in Russia, Oman, and other countries remained flat. This month's supply growth was primarily driven by increased output from OPEC's Middle Eastern members.
Refining and processing dynamics
Global refinery crude throughput rose to 80.9 million b/d in July 2026, but it was still nearly 500,000 b/d lower than the same period last year. This was due to operational disruptions at Middle Eastern refineries, partly offset by a significant increase in throughput from Asian refineries. Due to the Gulf conflict, the Q3 throughput forecast has been revised down by 370,000 b/d. However, an accelerated recovery pace has led to a Q4 forecast upgrade of 230,000 b/d. The full-year December 2026 processing estimate is still 1.6 million b/d lower year-on-year. Tight supply of light and middle distillates in the second half of the year is expected to support subsequent restocking and production increase needs. The global refinery processing forecast for 2027 has been raised by 470,000 b/d to 85.1 million b/d, representing a year-on-year increase of 350,000 b/d. In July, Atlantic Basin refinery margins hit a record high. European monthly profitability reached a new peak, followed by the US. Singapore's spring profit peak, however, remains unbroken. Rising cracking spreads for diesel, jet fuel, and gasoline are driven by inventory drawdowns, recovering demand, and tight refined product supplies. This situation is exacerbated by the extension of Russia's diesel export ban until August, indicating that middle distillate supply will remain tight through Q3 2026 and potentially beyond.
Appendix: Summary of supply and demand balance tables from foreign research reports
Data sourced from IEA, FGE, JPMorgan, Goldman Sachs, Morgan Stanley, and Zijin Tianfeng Futures.
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