Global oil demand is recovering from its May low as refined product supplies rebound, but the International Energy Agency (IEA) still expects average consumption in 2026 to be about 1 million barrels per day (b/d) lower than in 2025.
“A recovery in world oil demand is underway, with consumption set to rise from its May nadir on seasonal trends and as pent-up demand is released in line with a rebound in product supplies,” the agency said in its July 2026 Oil Market Report.
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The annual contraction in demand is expected to ease from 4.8 million b/d in the second quarter of 2026 to 1.7 million b/d in the third quarter. Consumption is then projected to rise by 1.2 million b/d in the fourth quarter.
The agency expects global oil demand to grow by 2 million b/d in 2027. However, the combined pace of expansion over 2026 and 2027 is expected to remain well below historical trends.
Global oil supply rebounded by 4.1 million b/d in June to 98.8 million b/d as flows through the Strait of Hormuz resumed and Gulf production partially recovered.
World output remained 9.4 million b/d below pre-war levels. The IEA expects supply to decline by an average of 3.7 million b/d to 102.6 million b/d in 2026, depending on a swift de-escalation of renewed hostilities.
Supply could expand by 7.5 million b/d in 2027 if transit volumes improve.
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Benchmark crude prices fell sharply in June as tanker traffic from the Persian Gulf increased and market attention shifted towards the possibility of oversupply.
North Sea Dated crude declined by US$22 per barrel from May to about US$68 per barrel. Prompt time spreads also moved into contango, where prices for future delivery exceed those for immediate delivery.
Prices later increased after a ceasefire agreement was breached on July 7 and 8. North Sea Dated crude was trading at about US$77 per barrel when the report was prepared.
Global refinery runs rose by 1.5 million b/d in June but remained 6 million b/d below the same period in 2025.
The IEA attributed the lower year-on-year activity to Middle East export refineries remaining offline, attacks curtailing Russian processing, and reduced operating rates in Asia.
Global refinery runs are forecast to decline by 2.4 million b/d in 2026 before increasing by 3.1 million b/d in 2027. Refining margins and refined product cracks reached four-year highs in early July as crude supplies increased, oil prices fell, and product markets remained tight.
Observed global oil inventories increased by 21 million barrels in June, the first rise in four months. Higher volumes of oil in transit offset continued withdrawals from onshore storage.
Total stocks held by members of the Organization for Economic Co-operation and Development (OECD) declined by 62 million barrels in June. An estimated 44 million barrels came from government stock releases. Non-OECD crude stocks fell by 37 million barrels, led by a 41 million-barrel draw in China.
