The Organization of the Petroleum Exporting Countries (OPEC) has once again revised down its forecast for global oil demand growth next year, as the blockade of the Strait of Hormuz triggered by the Iran war reshapes the global energy supply and demand landscape.
In its latest monthly oil market report released Thursday, OPEC lowered its 2026 global oil demand growth forecast to 970,000 barrels per day, down from a prior expectation of 1.17 million barrels per day. This marks the second consecutive month of downward revisions. OPEC+ production contracted further in May, with Iran showing the most significant decline.
Soaring fuel prices are suppressing demand from consumers and businesses worldwide. Major institutions, including the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA), anticipate a decline in oil demand this year. While OPEC's outlook remains more optimistic than these agencies, its downward revision aligns with the overall trend.
Concurrently, OPEC raised its 2027 demand growth forecast to 1.73 million barrels per day, an increase of 190,000 barrels from last month's prediction, suggesting the organization expects a robust consumption rebound once the war's impact subsides.
Demand Downgrade: India and Middle East Are Primary Drags
OPEC's report did not explicitly state the reasons for the downgrade, but details reveal the sources of pressure. India's demand growth forecast was cut by 60,000 barrels per day, and the Middle East consumption forecast was reduced by 40,000 barrels per day. Combined, these two regions constitute the main source of this revision.
The impact on Middle East demand is particularly direct. OPEC estimates that in the first month of the Iran war (March this year), oil consumption in the Middle East region decreased by approximately 500,000 barrels per day compared to a year earlier. It attributes "downside risks" to regional demand to "ongoing oil market conditions," noting that the ultimate impact will depend on "the duration and severity of the disruptions."
Regarding the overall trajectory of the global economy, OPEC maintained its existing assessment, stating that "despite persistent geopolitical tensions, the global economic performance in the first half of 2026 remains resilient," with related economic growth forecasts unchanged.
Supply Contraction: Strait of Hormuz Blockade Thwarts Production Increase Plans
The Strait of Hormuz is one of the world's most critical oil transit chokepoints. Its blockade has prevented the export of millions of barrels of daily production from the Middle East. OPEC+ had previously agreed to restore production increases starting in April, but the strait blockade has rendered this plan unworkable.
According to secondary source data cited by OPEC, the average crude oil production for OPEC+, which includes Mexico, was 33.13 million barrels per day in May, a decrease of approximately 190,000 barrels from April. Iran was the member with the largest decline, with tanker tracking data showing a significant drop in its May exports due to the U.S. blockade.
It is noteworthy that the May data still includes production from the United Arab Emirates, despite the country's formal exit from OPEC and OPEC+ on May 1.
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