IEA Cuts Brent Demand Outlook for 2026

The International Energy Agency reported on 11 September that the Strait of Hormuz will not reopen to navigation in 2026. Because of ongoing disputes between the United States and Iran, the waterway that carried 20% of global oil and gas supply will remain restricted throughout the year. The agency warned that 2026 and 2027 will essentially be a lost period for oil demand growth.

Global oil demand is now projected to drop by 2.5 million barrels per day in 2026, down from the 1.6 million daily contraction estimated last month. Demand is expected to recover by 2.6 million barrels per day in 2027, barely surpassing 2025 levels. Meanwhile, global oil supply is forecast to fall by 5.7 million barrels per day in 2026, with over 10 million barrels per day in Gulf production halted.

Brent crude surged up to 14% this week and traded near $110 per barrel on Friday, reaching its highest point since 15 May, before settling near $105. At the same time, the average price of US diesel surpassed $6 per gallon for the first time in history. Price spikes were reinforced by attacks from Yemeni Houthi rebels around the Bab al-Mandeb strait and Ukrainian strikes on Russian refineries.

Total Russian exports fell by 410 thousand barrels per day in August to their lowest point since 2018. To calm markets, the IEA has released 320 million of the 400 million barrels planned in March from emergency reserves. However, releases slowed to 20 million barrels in August, down from 90 million barrels in May.