IEA: Global Oil Demand to Fall 2.6 mb/d in 2026 as War Curbs Supply
IEA's October report forecasts a 2.6 mb/d demand drop in 2026, a fragile supply rebound and diesel tightness persisting into 2027.
The story in focus
The IEA's October Oil Market Report forecasts global oil demand falling 2.6 mb/d in 2026, with diesel accounting for 25% of the fourth-quarter drop. Supply rose to 102.3 mb/d in September but renewed Gulf attacks leave recovery fragile; inventories sit 509 mb below end-February levels.
- Global oil demand is forecast to fall 2.6 mb/d in 2026, to 102.4 mb/d, with diesel taking 25% of the 4Q26 decline.
- September supply rose 2.5 mb/d month-on-month to 102.3 mb/d, helped by Gulf producers, but October attacks left projections largely unchanged.
- Global observed inventories were 509 mb below end-February levels by end-September, with on-land stocks at their lowest since at least 2016.
Demand falls as diesel tightens
The IEA forecasts world oil demand declining 2.5 mb/d year-on-year in 4Q26 and 2.6 mb/d on average in 2026, to 102.4 mb/d. The agency attributes the drop to restricted product availability, high fuel prices and a deteriorating economic outlook, with diesel accounting for 25% of the fourth-quarter fall. A partial 2 mb/d recovery in 2027 would still leave global use 620 kb/d below 2025 levels.
Diesel markets remain strained. Global diesel and gasoil availability was 1.5 mb/d lower year-on-year in 2Q26 and 1.7 mb/d lower in 3Q26, and OECD gasoil stocks drew counter-seasonally to 565 mb in July, their lowest since November 2023. The IEA expects the gasoil market to stay tight well into 2027, depending on a recovery of Middle East product supply.
A fragile supply rebound
Global oil supply rose 2.5 mb/d month-on-month to 102.3 mb/d in September, led by Saudi Arabia and other Gulf producers. Gulf crude exports reached 13.9 mb/d, over 75% of pre-war levels. Refined product and LPG shipments have recovered far more slowly and remain below half their pre-war levels.
The IEA said renewed attacks in October left its projections for the rest of the year largely unchanged, and that markets may face more turmoil before an eventual 2027 surplus. On 2 October, G7 leaders said they would accelerate delivery of agreed volumes under the IEA Collective Action of 11 March, prioritising diesel releases.
What does the IEA expect for diesel supply through 2027?
The IEA expects the gasoil/diesel market to return to surplus in 1Q27, but that will not offset 2026's deficit, so tightness persists well into 2027, dependent on recovering Middle East product supply.
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