Global oil demand is on track for its steepest quarterly decline since the COVID-19 pandemic, the International Energy Agency (IEA) said in an April 21 report, as the Iran war disrupts supply, lifts prices, and cuts fuel use across key markets. The IEA projected that oil demand will fall by 1.5 million barrels per day (mb/d) in the second quarter of 2026.
The agency said “a forecast 1.5 mb/d 2Q26 decline would be the sharpest since Covid-19 slashed fuel consumption.” For the full year, the IEA expects oil demand to contract by 80,000 barrels per day (kb/d). That is 730 kb/d lower than the outlook in last month’s report.
The agency said the first signs of weakness have come from the Middle East and Asia Pacific.
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The IEA warned that the downturn will not remain limited to those regions or products. The agency said “demand destruction will spread as scarcity and higher prices persist.”
The report also showed a steep fall in global supply. The IEA said oil supply dropped by 10.1 mb/d in March to 97 mb/d, as continued attacks on energy infrastructure in the Middle East and restrictions on tanker movements through the Strait of Hormuz triggered what it described as the largest disruption in history.
Production from the Organization of Petroleum Exporting Countries and additional aligned nations (OPEC+) fell by 9.4 mb/d month-on-month to 42.4 mb/d, according to the IEA. Non-OPEC+ supply declined by 770 kb/d month-on-month to 54.7 mb/d, as lower output from Qatar offset gains in Brazil and the United States.
Refining activity also weakened as supply problems spread through the system. The IEA reported that refineries in the Middle East and feedstock-constrained plants in Asia cut runs by around 6 mb/d in April, bringing throughput down to 77.2 mb/d.
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Global crude runs are now expected to decline by 1 mb/d on average in 2026 to 82.9 mb/d, the agency reported. The IEA added that refining margins rose sharply during the disruption, with middle distillate cracks reaching record highs.
Oil inventories fell in March as flows through Hormuz tightened. The IEA said global observed oil inventories declined by 85 million barrels.
Outside of the Middle East Gulf, stocks dropped by 205 million barrels, or 6.6 mb/d, as shipments through the strait were choked off, the report stated.
At the same time, crude and oil products built up in the Middle East as export routes narrowed. The IEA said floating storage in the region rose by 100 million barrels, while onshore crude stocks increased by 20 million barrels. China added 40 million barrels of crude to storage.
Oil prices also surged. The IEA said March recorded the largest monthly price gain ever seen in the wake of the supply shock, as refiners moved to replace stranded Middle Eastern cargoes.
“At the time of writing, North Sea Dated crude was trading around $130/bbl – $60/bbl above pre-conflict levels,” the agency reported.
