The International Energy Agency (IEA) expects global oil supply to fall by 4.3 million barrels per day (bpd), or around 4%, this year as renewed hostilities in the Middle East disrupt supplies and push the global market deeper into deficit.
The breakdown of the U.S.-Iran ceasefire has seen tanker attacks resume in the Strait of Hormuz, while Iran-aligned Houthi rebels have renewed attacks in the Red Sea. Drone attacks have also disrupted oil exports from Kazakhstan and affected shipments through the Black Sea.
The IEA has stated that the global oil supply is now expected to average 102.02 million bpd, which is about 1.27 million bpd short of demand. This is in contrast to the 3.7 million bpd supply decline forecast in July.
Middle East oil loadings recovered to around 20 million bpd in early July, broadly matching pre-war levels, but fell to 12 million bpd later in the month. Regional production remained 8.3 million bpd below pre-war levels, although this was an improvement from the 14 million bpd loss recorded at the peak of the crisis.
The IEA expects an oil market deficit of 1.8 million bpd during July-September, the deepest quarterly deficit since the fourth quarter of 2021.
The agency also lowered its forecast for global oil demand, now expecting it to contract by 1.6 million bpd this year as higher prices and restricted fuel supplies weigh on consumption. OPEC, however, continues to forecast demand growth of 580,000 bpd, despite cutting its estimate by 200,000 bpd.
In July, Russian oil refining stayed at a level close to its 20-year low of 3.9 million bpd due to disruptions to the refineries caused by Ukrainian drone attacks, while Russian crude output also decreased by 100,000 bpd to 8.76 million bpd, falling short of its OPEC+ target.
Global refinery crude processing dropped by 5 million bpd year-on-year in July, as limited capacity failed to offset supply disruptions, pushing refining margins to record highs.
Looking ahead, the IEA expects global supply to exceed demand by 4.61 million bpd in 2027 if tensions ease. This could allow inventories to recover to February 2026 levels by mid-year, following 410 million barrels of cumulative stock withdrawals since the Iran war began.
Reference: Reuters
