On May 13, the International Energy Agency (IEA) released its May Oil Market Report. The report indicates that due to disruptions in Middle Eastern oil production and shipping caused by regional conflict, a severe global supply shortfall is projected for 2026, which will be insufficient to meet total market demand.
The report shows that tanker shipping through the Strait of Hormuz remains persistently constrained, with the cumulative supply loss from Gulf producers having surpassed the one-billion-barrel mark. Currently, the scale of daily crude oil production shutdowns exceeds 14 million barrels, constituting an "unprecedented supply shock."
Based on the latest developments, the IEA has significantly revised its market supply and demand outlook. The report forecasts that global oil supply in 2026 will fall short of total demand by 1.78 million barrels per day. This figure marks a dramatic reversal compared to the surplus of 410,000 barrels per day projected in last month's report and the surplus of nearly 4 million barrels per day forecast in December last year.
On the supply side, affected by geopolitical conflict, the IEA has sharply lowered its full-year 2026 supply forecast by 3.9 million barrels per day, a further widening from the previously estimated reduction of 1.5 million barrels per day. On the demand side, soaring energy prices and slowing economic growth are creating a dual squeeze on consumption. The report expects global oil demand to decrease by 420,000 barrels per day this year, a contraction far exceeding the previously forecasted decline of 80,000 barrels per day.
Regarding future trends, the IEA outlined its baseline forecast assumption: shipping conditions through the Strait of Hormuz are expected to gradually recover starting in the third quarter of this year. However, the agency also emphasized that the current supply shortfall will continue to exert sustained pressure on global energy security and economic operations.
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