IEA cuts 2026 oil demand forecast as prices rise

The International Energy Agency cut its forecast for global oil demand in 2026, citing the recent escalation in the Middle East war and rising energy prices.

The Paris-based agency said on Friday that it now expected consumption to fall by 2.5 million barrels per day from last year. In August, it had forecast a decline of 1.6 million barrels per day.

Crude prices have remained above levels seen before US and Israeli attacks on Iran in late February, after which war broke out and oil infrastructure was damaged in several Gulf countries.

The IEA also warned about diesel costs, saying refining constraints and damage to Gulf facilities had cut supplies of a key industrial and transport fuel. It said diesel and gasoil, which account for nearly 30% of global demand, surpassed $200 a barrel in the United States in early September, 94% above pre-war levels, with Europe and Asia not far behind.

The agency said Ukrainian strikes on Russian refineries and other energy targets were also affecting global fuel prices and would lead consumers to reduce purchases.

The IEA said renewed attacks in the Gulf and in the Red Sea's Bab al-Mandeb choke point were continuing to hamper the normalisation of oil flows. Houthi rebels in Yemen claimed on Friday to have taken control of the Bab al-Mandeb strait, a crucial shipping lane for routes toward the Suez Canal and Europe.

“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,” the IEA said.