The IEA warned today that the recent escalation in hostilities between the US and Iran could once again upend global supply and demand balances.
In its latest Oil Market Report (OMR), the IEA trimmed its forecast for this year's demand decline and raised its supply outlook. But both projections hinge on tanker flows through the strait of Hormuz continuing to recover.
The Paris-based watchdog warned that a return to conflict could jeopardise the partial recovery in global oil supply and demand that has been underway since mid-June, when the US and Iran struck an interim peace deal.
Global oil demand has been recovering from its May low of 97.9mn b/d, down by 5.3mn b/d on the year, as increased exports through the strait of Hormuz are absorbed by pent-up Asian demand, the IEA said. Lower oil prices and a brighter economic outlook are also supporting oil use, it said.
As a result, the agency said oil demand was set to decline by around 1mn b/d to 103.5mn b/d in 2026, around 70,000 b/d less than its estimate last month. It kept its projection for a 2mn b/d increase in global oil demand in 2027.
The IEA said global oil supply rebounded by around 4.1mn b/d to 98.8mn b/d in June as Mideast Gulf producers partially restored output after the US-Iran framework agreement.
Higher Mideast Gulf exports through the strait and greater use of routes that bypass the waterway lifted regional exports by 6.5mn b/d on the month to 16.1mn b/d, though they remained 8.3mn b/d below February levels.
If exports continue to improve, the IEA said global oil supply would decline by 3.7mn b/d to 102.6mn b/d in 2026, around 210,000 b/d higher than last month's OMR, before rebounding by 7.5mn b/d in 2027.
The IEA's balances imply a supply deficit of around 900,000 b/d in 2026 and a surplus of 4.6mn b/d in 2027. But the recovery in product supplies was lagging the rebound in crude flows, the agency said, as loadings from key Mideast Gulf refineries had yet to resume.
It also noted that Ukrainian attacks on Russian refineries and export infrastructure had further tightened product markets.
Global observed oil stocks rose by 21mn bl in June, their first increase since the Iran war began, as higher oil on water more than offset draws from onshore tanks.