The IEA has revised down its 2026 oil supply outlook as prolonged disruption in the Middle East delays the return of Gulf flows and keeps fuel prices high.
IEA report points to a weaker oil market in 2026
Global oil demand and supply will fall further in 2026 than previously expected, according to the International Energy Agency’s September oil market report.
The stalled negotiations aimed at ending the Middle East conflict, now ongoing for more than six months, will delay the return to normal conditions for oil flows from the Persian Gulf until 2027 and push fuel prices even higher.
Crude reaches USD 110 a barrel for the first time since May
This week, for the first time since May, an increase in attacks targeting oil tankers travelling along Middle Eastern shipping routes helped push crude prices towards USD 110 per barrel.
According to the IEA report, global oil supply in 2026 is now expected to fall by 5.7 million barrels per day, or around 6%. The projected decline is larger than the 4% previously forecast.
In August 2026, global oil production fell by 1.6 million barrels per day month on month to 100.1 million barrels per day. More than 10 million barrels per day of supply from the Gulf remained blocked because of persistent security risks.
Total supply this year is expected to fall by 5.7 million barrels per day to 100.7 million barrels per day, largely because of delays in the recovery of Middle Eastern operations, which is now expected in 2027.
The United States, Canada, Brazil, Guyana and Argentina are leading production growth among non-OPEC+ countries, adding 1.4 million barrels per day in 2026 and 1 million barrels per day next year.
Prices for refined petroleum products have also risen. Fuels such as diesel have reached record highs as the ongoing conflicts in the Middle East and between Russia and Ukraine have caused damage to oil refineries.
In August, the summer peak in refinery activity reached 81.4 million barrels per day, up from the previous month. However, this remained below the level recorded a year earlier because of losses across the Middle East, Russia and crude-importing economies in Asia.
As a result, global refinery activity is expected to decline further in 2026.
Demand falls, but supply falls even faster
High fuel prices are pushing oil demand lower, but not as sharply as supply. Global oil demand is expected to fall by 2.5 million barrels per day this year, compared with a previously forecast decline of 1.6 million barrels per day.
Supply, however, is contracting even more rapidly, forcing countries to draw on inventories. In August, global stocks fell by 3.1 million barrels per day, according to the IEA, reaching a level not seen since 2023.
For 2027, the IEA currently expects a rebound, with oil demand rising by 2.6 million barrels per day.
So far, inventories have played a crucial role in balancing the oil market. But stocks fell sharply in August, safety margins are narrowing and the global refining system is approaching its limits.
The effects of the conflicts in the Middle East and between Russia and Ukraine are therefore weighing increasingly heavily on the global oil market, with implications extending to fuel-importing economies, including those across Africa.
