Global oil demand is set to exceed supply in the current year amid the ongoing conflict in the Middle East, reversing previous projections of a surplus.
According to the May 2026 Oil Market Report by the International Energy Agency (IEA), global oil supply is projected to fall by 3.9 million bpd across 2026, with ~10.5 million bpd of Gulf oil production currently offline. Global demand is forecast to contract by 420,000 bpd due to surging prices, slow economic growth and widespread flight cancellations, with oil demand still set to outpace supply by 1.78 million bpd in the current year.
Global crude runs are expected to plunge by 1.6 million bpd to an average of 82.3 mb/d for the year as operators face infrastructure damage and severe feedstock shortages, with refinery throughput expected to fall by 4.5 million bpd in the second quarter alone.
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Operators in the Middle East and Asia are battling significant damage to energy infrastructure and reduced availability of crude feedstocks, largely stemming from the closure of the Strait of Hormuz. The heaviest cuts have been in the Middle East and Asia-Pacific, heavily impacting naphtha, LPG and jet fuel production.
According to the IEA, global oil inventories are projected to fall by an average of 8.5 mb/d during the second quarter of 2026, with the drawdown largely due to a decline in crude output from countries including Iraq, Saudi Arabia, Kuwait and the UAE.
The steepest inventory draws are projected to occur in May and June, helping to keep Brent crude prices elevated at ~$106 per barrel.
Whereas the release of a total of 400 million barrels by 32 IEA members is expected to provide a temporary buffer, the market will still face a significant deficit that could keep prices high through the year.
Oil prices were mildly lower on Wednesday morning, with Brent crude for July delivery falling 0.3% to trade at $107.50/bbl at 6.30 am ET while WTI crude for June delivery traded 0.5% lower to change hands at $101.67/bbl.
By Alex Kimani for Oilprice.com
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