IEA: Global Oil Demand to Fall 2.6 mb/d in 2026 on War Disruptions
The IEA forecasts global oil demand to drop 2.6 mb/d in 2026 as the Iran war restricts fuel supplies and raises prices, with diesel hit hardest.
What you need to know
The IEA's October Oil Market Report forecasts global oil demand to fall by 2.6 mb/d in 2026, driven by supply disruptions and high prices linked to the Iran war. Diesel accounts for a quarter of the decline. Supply is projected to drop 5.8 mb/d this year before rebounding in 2027.
- World oil demand is forecast to fall 2.6 mb/d in 2026, with diesel making up 25% of the drop.
- Global oil supply rose 2.5 mb/d month-on-month to 102.3 mb/d in September, led by Gulf producers.
- North Sea Dated crude averaged $116.89/bbl in September, up $26.17 month-on-month.
Demand outlook
The IEA forecasts world oil demand to decline by 2.5 mb/d year-on-year in the fourth quarter of 2026 and by 2.6 mb/d on average for the year, to 102.4 mb/d. The agency attributes the drop to restricted product availability, soaring fuel prices, and a deteriorating economic outlook as the Iran war affects markets. Diesel is expected to account for 25% of the decline. A partial recovery of 2 mb/d in 2027 would still leave global oil use 620 kb/d, or 0.6%, below 2025 levels.
Supply and prices
Global oil supply increased by 2.5 mb/d month-on-month to 102.3 mb/d in September, driven by Gulf producers. OPEC+ gains of 2.1 mb/d were led by Saudi Arabia. For 2026, supply is projected to fall by an average of 5.8 mb/d to 100.7 mb/d, before rising by 7.7 mb/d in 2027. However, renewed attacks in the Gulf leave the recovery fragile.
North Sea Dated crude soared by $26.17/bbl month-on-month to $116.89/bbl in September, as renewed Middle East hostilities disrupted supplies and Asian refiners accelerated purchases. The 11 September bombing of the Saudi East-West Pipeline and an exponential rise in freight rates compounded the rally. At the time of writing, Dated was trading around $134/bbl.
Diesel strain
Diesel markets remained under significant strain as prolonged supply disruptions forced counter-seasonal stock draws ahead of autumn refinery maintenance and peak winter demand. Global diesel exports in September were 700 kb/d lower year-on-year, as a 1.3 mb/d loss from Russia and the Middle East was only partly offset by higher supply from other sources. Wholesale diesel prices reached all-time highs of around $220/bbl in Europe and the United States in September.
What is driving the forecast decline in global oil demand for 2026?
The IEA cites restricted product availability, soaring fuel prices, and a deteriorating economic outlook as the Iran war affects markets. Diesel accounts for 25% of the projected 2.6 mb/d drop.
Sources & context
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