IEA cuts 2026 oil demand forecast, warns of massive 2027 surplus

The IEA on Wednesday cut its 2026 global oil demand outlook further, saying consumption will contract as high prices and the Iran war weigh on the market.euronews
In its first 2027 forecast, the agency projected supply surging by 8 million bpd as Gulf output recovers, far outpacing a 2 million bpd demand rebound.channelnewsasia
Oil prices fell below $80 as the expected reopening of the Strait of Hormuz under the U.S.-Iran peace deal eased supply fears, according to Euronews.euronews

IEA Warns of Looming Oil Glut as Gulf Supply Shock Reshapes Market

The International Energy Agency on Wednesday cut its global oil demand forecast for 2026 and warned that a rapid recovery in supply next year could flood the market with crude, even as the war-torn Strait of Hormuz begins to reopen under a preliminary U.S.-Iran peace agreement.

Demand Destruction Deepens

In its June Oil Market Report, the IEA said global oil consumption will contract through 2026, deepening the demand destruction caused by elevated fuel prices and severe supply disruptions stemming from the conflict in Iran. The revision marks the latest in a series of increasingly bearish forecasts from the Paris-based agency, which in January had projected demand growth of 930,000 barrels per day before the war upended the market.iea

The IEA’s May report had forecast demand falling by 420,000 barrels per day. That estimate has now been revised sharply lower, with the U.S. Energy Information Administration separately projecting demand will decrease by 1.1 million barrels per day over the course of 2026.iea

Strategic oil reserves in advanced economies have fallen to their lowest level since 1990, the IEA said, after cumulative supply losses from Middle East Gulf producers exceeded 1 billion barrels during the conflict.euronews

A 2027 Surplus Looms

In its first look at 2027, the IEA projected global oil supply could surge by 8 million barrels per day as Middle East Gulf production recovers and OPEC+ raises output targets. With demand expected to grow by only 2 million barrels per day next year, the forecasts point to an enormous surplus if the peace agreement holds.channelnewsasia

The agency cautioned, however, that a full recovery of flows through the Strait of Hormuz will take months, as mines must be cleared and supply chains stabilized. The IEA said in May that even assuming the conflict ended by early June, the market would remain “severely undersupplied through the end of Q3 2026”.energynow

Peace Deal Set for Friday

The United States and Iran reached a preliminary agreement on Sunday to end more than 100 days of war, with a formal signing ceremony scheduled for Saturday, June 20, in Geneva. President Trump said the Strait of Hormuz would reopen to all maritime traffic upon signing of the deal.npr

Despite the diplomatic breakthrough, the IEA warned that logistical obstacles — including mine clearance and disrupted shipping routes — mean the transition from severe undersupply to potential glut could take several quarters to unfold.euronews