IEA sees sharper oil shortage as Hormuz crisis restricts supply

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IEA sees sharper oil shortage

Highlights

The IEA sees a 1.8 million bpd oil deficit in 3Q26.
Global supply is forecast to fall 4.3 million bpd in 2026.
Oil demand is expected to decline 1.6 million bpd this year.

The IEA expects the market to show a deficit of 1.8 million barrels a day in the third quarter, more than double the roughly 800,000 barrels a day projected last month, according to its August oil market report. Global supply is now forecast to fall by 4.3 million barrels a day in 2026 to 102 million barrels a day, while demand is expected to decline by 1.6 million barrels a day this year.

Gulf supply recovery loses momentum

Gulf oil production rose by another 2.5 million barrels a day in July to 23.9 million barrels a day but remained 8.3 million barrels below prewar levels. Regional exports fell by 2.1 million barrels a day to 15 million barrels a day after the Strait of Hormuz was effectively closed again in early July and attacks hit tankers and energy infrastructure.

The IEA said loadings briefly reached 20 million barrels a day at the start of July before dropping to around 12 million later in the month. With no agreement yet restoring normal traffic through Hormuz or the Bab el-Mandeb Strait, the agency cut its supply forecasts for the rest of the year.

Oil prices have reflected that instability. Benchmark crude traded in an unusually wide range of almost $40 a barrel in July, with prices briefly reaching $100 on July 23 before easing. North Sea Dated was trading around $92 a barrel when the IEA prepared the report.

Inventories and refining add to the pressure

The tightening is also visible in global inventories. Observed oil stocks fell by 69 million barrels in July, taking the total below 7.9 billion barrels for the first time since April 2025. Since the end of February, inventories have declined by 410 million barrels, an average draw of 2.7 million barrels a day.

Refining markets are under similar strain. Global refinery throughput remained nearly 5 million barrels a day below year-earlier levels in July, while Atlantic Basin refining margins reached record highs as diesel, jet fuel, and gasoline supplies tightened. Seaborne product trade was down 3.8 million barrels a day from a year earlier.

The IEA still expects the market to return to surplus toward the end of the year, but the margin for error has narrowed. Inventory buffers are being depleted quickly, and any further disruption to Hormuz, Gulf production, or regional export routes could deepen the shortage before supply normalizes.

As we previously reported, IEA sees the first global gas demand drop since 2022.

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