The global oil demand outlook has been slashed once again by the International Energy Agency (IEA) as it warned the ongoing Iran war would not see supplies return to normal until 2027.
The Paris-based agency said in its monthly report that the “impasse in negotiations between the United States and Iran” and renewed attacks in the region would “hamper the normalisation of oil flows”.
It is now predicting 2026 worldwide oil consumption dropping by 2.5 million barrels a day versus 2025, which is far greater than the 1.6 million barrels decline forecast in August.
The prediction comes as oil prices have surged back above 100 US dollars this week because of attacks on Iranian oil tankers and concerns about further disruptions to supply amid ongoing fighting in the Middle East.
UK gas prices also reached a near four-year high, sparking fears over soaring energy costs over the winter months.
The IEA alerted over soaring diesel costs in particular over the months ahead, because of refining issues.
It said: “The rise in both crude futures and physical prices pales in comparison with those for refined products, where market tightness is now most acute.
“Diesel/gasoil, which accounts for nearly 30% of global demand, saw prices in the US surpass the 200 dollars a barrel mark in early September, 94% above pre-war levels, with Europe and Asia not far behind.”
The IEA also cautioned that supplies would be lower than it first feared as the Strait of Hormuz remains in an Iranian chokehold, and as Iran-backed Houthi rebels in Yemen have advanced on the Bab al-Mandeb Strait, with a “full recovery in supplies from Middle East producers deferred until 2027”.
It added: “With buffers shrinking and the global refining system stretched to the limit, the need for progress in resolving the conflict in the Middle East – and the Russia-Ukraine war, which is now in its fifth year – is greater than ever to avoid further market tightening and demand destruction.”
