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Informist, Friday, Jul. 10, 2026

MUMBAI – The International Energy Agency said global oil demand is recovering from the rock bottom seen in May, driven by higher fuel use in the summer and the release of pent-up demand in line with rebounding supplies. Even so, global oil demand is projected to decline by 1 million barrels per day in 2026 before rebounding by 2 million bpd in 2027.

"By October, we expect global demand to be up by more than 8 mb/d from the May low point (97.9 million bpd), putting it above 2025 levels for the first time since February," IEA said in its July oil market report. In May, oil demand registered a year-on-year decline of 5.3 million bpd.  

On supply, the agency said global oil flows rebounded sharply by 4.1 million bpd to 98.8 million bpd in June amid the reopening of the Strait of Hormuz and partial recovery in Gulf production. Nevertheless, world output remained well below pre-war levels around 9.4 million barrels per day.

Even if there is a swift de-escalation of renewed hostilities between US and Iran, oil supplies are on track to decline by an average of 3.7 million bpd to 102.6 million bpd in 2026. "If transit volumes improve, oil supply will expand by 7.5 mb/d next year," IEA said. 

In June, global refinery runs rose by 1.5 million bpd, but fell 6 million bpd on year, as export refineries in West Asia were yet to restart. In addition, Russia's throughput was curtailed by attacks, and Asia is still running at reduced rates. IEA expects global runs to decline by 2.4 million bpd in 2026 before rebounding by 3.1 million bpd in 2027.  

Global observed oil inventories were up by 21 million barrels in June, marking the first gain since the outbreak of war in February. "Oil on water swelled by 117 mb (million barrels), far outpacing continued drawdowns in onshore stocks of some 96 mb, including 44 mb of OECD government reserves," IEA said. 

Benchmark crude oil prices continued to "spiral lower" in June, erasing all of their "wartime gains" amid a pick-up in tanker traffic out of the Gulf and market expectations of a potential oversupply. North Sea Dated crude plunged to around $68 per barrel in June, down $22 per barrel from May. "Prices rose after the ceasefire agreement was breached on 7-8 July, with Dated trading around $77/bbl at the time of writing," IEA said. 

While the global oil market balance looks "set to swing back to surplus" towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait of Hormuz will gradually recover, allowing producers to restart fields and refiners in West Asia and elsewhere to resume product shipments. "Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalisation in oil markets," the agency said. 

At 1500 IST, the most-active August contract of crude oil on the NYMEX was down 0.6% at $71.65 per barrel. End

US$1 = INR 95.35

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Afra Abubacker

Edited by Akul Nishant Akhoury

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