IEA Sees Global Oil Demand Falling 2.7 Million Barrels Per Day in 2026, Recovery Expected in 2027
Global oil supply projected to rebound by 6.6 mb/d in 2027; diesel shortages and geopolitical risks remain major concerns
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The International Energy Agency (IEA) has forecast a 2.7 million barrels per day (mb/d) decline in global oil demand in 2026, taking average consumption to 102.3 mb/d. However, the agency expects demand to recover by 2 mb/d in 2027 as global supply chains gradually normalise.
According to the IEA’s November oil market assessment, the contraction in demand is expected to ease to 2.7 mb/d year-on-year in the fourth quarter of 2026, compared with an average decline of 4.4 mb/d during the second and third quarters.
The projected recovery in 2027 will largely be driven by petrochemical feedstocks, including LPG, ethane and naphtha, which are expected to account for around 80% of the increase. Transport fuel demand, meanwhile, is likely to see only modest growth as high prices accelerate vehicle electrification and fuel efficiency improvements.
Global Oil Supply Set for Strong Rebound
Global oil supply increased by 2.3 mb/d to 105.4 mb/d in October, following a 3 mb/d rise in September. The recovery was driven by higher Gulf exports despite continuing attacks on energy infrastructure and tankers.
The IEA has raised its fourth-quarter 2026 supply estimates by 3.3 mb/d, reflecting stronger-than-expected export flows.
After declining by 4.8 mb/d in 2026, global oil supply is projected to rebound by 6.6 mb/d in 2027 to an average of 108.1 mb/d.
Gulf producers are expected to contribute 5.3 mb/d to this increase, while the United States, Canada, Brazil, Argentina and Guyana are projected to add another 1.1 mb/d.
Oil Market Moves Towards Surplus
The IEA’s latest assessment suggests that global oil supply will exceed demand in the fourth quarter of 2026, with a more substantial surplus expected in 2027.
North Sea Dated crude prices have fallen 32%, declining from a high of $136 per barrel on October 8 to around $93 per barrel at the time of the assessment, as recovering Gulf exports eased market tightness.
However, diesel prices in Europe remain elevated at close to $180 per barrel, approximately 77% above pre-war levels.
Refinery Operations and Inventories
Global refinery throughput declined by 1.3 mb/d month-on-month to 81.3 mb/d in October. The IEA expects runs to recover to 84.7 mb/d in December and average 84.3 mb/d in 2027.
Global observed oil inventories increased by 52 million barrels in October, marking the first rise since June. However, onshore stocks continued to decline and remain at their lowest levels since at least 2016.
The agency noted that global observed inventories have fallen by a cumulative 462 million barrels since the beginning of the war.
Diesel Supply Remains a Major Concern
Despite improving crude availability, tight supplies of refined petroleum products, particularly diesel, remain a major concern.
Continuing attacks on Russian energy infrastructure are restricting diesel exports, adding to supply disruptions from the Middle East. The IEA expects emergency diesel stock releases over the coming months to help bridge the supply gap until global refinery operations and product output recover.
The agency has cautioned that renewed attacks on shipping and energy infrastructure remain significant downside risks.
While the global oil market is showing early signs of rebalancing, sustained recovery will depend on maritime security, stable Gulf exports and the normalisation of global energy supply chains.
