The latest IEA report provides a detailed forecast for global crude oil supply and demand through 2026 and 2027.
Key Forecast Summary
Demand Outlook: Global crude oil demand is projected to decline by 1.1 million barrels per day year-on-year in 2026, a downward revision of 700,000 bpd from the May report, primarily due to high fuel prices and product supply disruptions. Demand is expected at 98.72 million bpd in Q2 2026, before gradually recovering to 103.71 million bpd in Q3 and 106.57 million bpd in Q4. It is forecast to reach 105.3 million bpd in Q1 2027.
Supply Outlook: Global petroleum supply is forecast to decrease by 3.9 million bpd in 2026 to 102.4 million bpd, before rebounding by 8 million bpd in 2027 to 110.3 million bpd. Production fell to 94.5 million bpd in May 2026. Supply is expected to recover to 102.63 million bpd in Q3 2026, 107.58 million bpd in Q4, and 109.36 million bpd in Q1 2027.
Refining Outlook: Global refinery throughput is projected to fall by 2 million bpd in 2026 to 82 million bpd, with a year-on-year decline of 4.7 million bpd in Q2. A recovery of 3.1 million bpd to 85 million bpd is expected in Q3 as supply normalizes, with throughput forecast to reach 107.2 million bpd in 2027.
Impact of the U.S.-Iran Interim Agreement
The signing of a provisional U.S.-Iran agreement, which may reopen the Strait of Hormuz and lift the blockade on Iranian oil shipments, has weakened market sentiment, pushing Brent crude down to $81 per barrel. Key details remain unresolved. Combined with increased Gulf exports, strategic reserve releases, and weakening demand, prices have retreated from highs. On the supply side, immediate full restoration of Strait transit is unlikely. Atlantic basin crude exports to the East are expected to rise by 3.5 million bpd, while combined imports by China and Japan are forecast to fall by nearly 6 million bpd.
Market Outlook for 2027
The market is expected to shift into a significant surplus in 2027. Demand is forecast to grow by only 2 million bpd to 105.3 million bpd, while supply surges by 8 million bpd to 110 million bpd. This easing of market pressure could allow countries to replenish inventories and refine energy reserve policies.
Detailed Demand Analysis
The 2026 demand contraction would be the first annual decline since 2020, with a particularly sharp drop of 5 million bpd year-on-year in Q2. A seasonal inventory build from April to August is expected to support a demand recovery of 6.1 million bpd. Demand is projected to rebound by 2 million bpd in 2027 to 105.3 million bpd, driven by trade recovery, lower oil prices, and global GDP growth of 3.3%. The increase will be primarily from non-OECD nations.
Demand weakness has spread from naphtha and jet fuel to all oil products. Diesel is expected to be the largest drag in 2026, declining by 460,000 bpd, followed by gasoline. In 2027, the strongest rebounds are forecast for LPG/ethane and jet fuel, while diesel and gasoline recovery remains subdued.
Within the OECD, only the Americas region is expected to see growth in 2026, while Europe and Asia Pacific weaken significantly. China is the epicenter of demand contraction outside the OECD, with 2026 demand projected to fall by 360,000 bpd—a notable first in years—due to lower petrochemical activity and substitution by electric vehicles and railways.
Detailed Supply Analysis
Global supply is expected to fall in 2026 before rebounding in 2027. OPEC+ is implementing a cut of 4.7 million bpd this year, with an increase of 5.5 million bpd planned for next year. Russian production is revised down for 2026. Non-OPEC+ supply is projected to grow continuously over the two years, led by increases from the Americas, the UAE, and Qatar.
Gulf exports were severely constrained in May 2026. The UAE has emerged as a key regional supply hedge, utilizing existing and new pipeline capacity to bypass shipping chokepoints.
OPEC+ production showed significant divergence in May. Iranian supply plummeted due to the U.S. blockade, while Russian output was hit by attacks. Venezuela has increased production for four consecutive months following sanctions relief.
Non-OPEC+ supply increased in May 2026 and is projected to rise for the full year. Half of the non-OPEC+ supply growth through 2027 is expected to come from large offshore projects in Brazil, Guyana, Uganda, Norway, and the U.S., though project execution risks remain.
Refining Sector Analysis
The downward revision to the 2026 global throughput forecast is largely due to expected significant cuts in Q3, particularly in China, the Middle East, Eurasia, and non-OECD Asia. The Q3 rebound is expected to be led by the Middle East, China, and other Asian regions. Throughput in Eurasia, mainly Russia, remains under pressure due to refinery attacks.
The global refining industry is forecast to add 770,000 bpd of net crude distillation capacity in 2027, bringing global capacity to 107.2 million bpd. The narrative for next year is expected to shift from new capacity additions to industry maintenance and facility recovery.
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