IEA Predicts First Oil Consumption Drop Since 2020

Global oil consumption is on track for a significant annual contraction in 2026, with the International Energy Agency forecasting a decrease of 1 million barrels per day. This marks the first such decline since the widespread economic shutdown in 2020, largely driven by ongoing conflicts in the Middle East that are strangling oil flow from the region.

The agency notes that the most severe downturns occurred in the second and third quarters of 2026, with a projected smaller decline in the final three months. A recovery in oil demand is expected to commence, fueled by peak summer travel and the reopening of key shipping routes like the Strait of Hormuz.

However, renewed hostilities in July 2026 have again imperiled commerce through the Strait of Hormuz, a critical chokepoint for global oil and gas supplies. While global oil production saw an increase in June 2026 as shipping resumed, output remains substantially below pre-conflict levels. The IEA cautions that any market recovery will be neither swift nor linear due to the volatile environment.

Despite these uncertainties, stronger-than-expected output from non-Gulf producers, coupled with demand below earlier estimates, could lead to a market surplus before the end of 2026 and into 2027. This outcome would provide much-needed relief and allow countries to rebuild their inventories.