International Energy Agency downgrades global oil demand expectations
The International Energy Agency lowered its oil demand forecast due to conflicts in Iran and declining supply, projecting the largest annual drop since the 2020 pandemic.
The International Energy Agency has revised its global oil demand forecast downward due to conflicts in Iran and declining supply. The Paris-based agency adjusted its expected demand decline for this year to 2.5 million barrels per day, pointing to the largest annual drop since the 2020 COVID pandemic.
Downward Revision in Demand Forecast
The International Energy Agency reported that consumption could fall further in the coming months as the conflicts in Iran prolong and consumers are forced to adapt to shrinking supplies.
Largest Decline Since the 2020 Pandemic
The Paris-based agency increased its forecast for the expected drop in global oil demand this year by 940,000 barrels per day to 2.5 million barrels. This represents the largest annual average decline recorded since the 2020 pandemic, when the global economy came to a standstill.
Depleting Inventories and Supply Deficit
In the organization's monthly report, it was emphasized that global oil inventories are decreasing at a record pace. Due to constrained supply and the depletion of commercial inventory buffers, it was stated that additional drops in demand may be necessary in the coming months to close the gap.
Delay in Oversupply and 2026 Shocks
The agency noted that the re-emergence of an oversupply would be delayed until 2027. It also conveyed that the damage expected to be sustained by 2026 oil demand is comparable in scale to the four largest shocks of the past 60 years.
Petrochemical Sector and Price Increases
It was indicated that middle distillates like diesel and feedstocks used in petrochemical plants in Asia will be affected the most by this process. With escalating tensions between Iran and the US, the barrel price of Brent crude exceeded $100 for the first time since July.
Red Sea Shipping Concerns
The intensification of clashes between Yemen-based Houthis and Saudi-backed forces heightened concerns regarding oil shipments from the southern Red Sea. Following these developments, oil traded at around $107 per barrel on Friday.