Supply Constraints Deepen and Demand Contracts in Global Oil Market
The International Energy Agency projects a 2.5 million barrel per day drop in global oil demand due to Middle East conflicts and diplomatic deadlocks.
While conflicts in the Middle East and the diplomatic deadlock between the US and Iran deepen supply constraints in the global oil market, the International Energy Agency announced that a contraction of 2.5 million barrels per day is projected in global oil demand on an annual basis.
Expectation of Contraction in Global Oil Demand
In its September 2026 Oil Market Report, the International Energy Agency reported that escalating security risks and rising fuel prices have triggered a significant drop in global oil demand.
The organization revised its 2026 global oil demand forecast downward by 940,000 barrels per day compared to last month, projecting an annual contraction of 2.5 million barrels per day.
Production Losses in the Gulf Region
Global oil production decreased by 1.6 million barrels per day in August compared to the previous month, falling to 100.1 million barrels, with security risks in the Gulf playing a decisive role in this drop.
While more than 10 million barrels per day of production went offline in the Gulf region, the IEA revised its global supply forecast for the entirety of 2026 down to 100.7 million barrels per day, reflecting a loss of 5.7 million barrels per day.
Increase in Brent Oil Prices
As supply tightness in physical and futures markets pushed prices higher, the price of North Sea Dated Brent crude reached $113.48 on September 9.
Brent futures contracts traded at around $105 per barrel, hovering 45% above their pre-war value, while freight costs broke records.
Record Increases in Diesel Prices
While the heaviest dimension of the crisis is felt in refined fuel products, diesel and gas oil prices in the US exceeded $200 per barrel in early September.
As net diesel exports from the Gulf and Russia declined in August, the price spread between crude oil and refined products pushed refinery margins to record levels.
Rapid Depletion of Oil Inventories
Globally observed oil inventories decreased by an average of 3.1 million barrels per day in August, bringing total depletion since the beginning of the war to 507 million barrels.
While inventories in non-OECD countries declined in August led by China, the increase in OECD commercial inventories offset the drop in government stockpiles.
Market Tightness and Future Risks
The IEA warned that the market will tighten further due to refinery capacities reaching saturation and inventory buffers shrinking.
It was emphasized that if the diplomatic impasse continues, high prices will more severely suppress global demand and economic activity.