The International Energy Agency (IEA) slashed its 2026 global oil supply forecast for a third consecutive month in the September Oil Market Report, published on 11 September 2026. Global supply is now expected to fall by 5.7 million barrels per day (mb/d) this year, roughly 6 percent, a 35 percent steeper cut than the 4.3 mb/d decline it forecast just one month ago. The agency also warned that a normalisation of Gulf production flows is no longer expected before 2027.
The downgrade reflects the deepening impact of the Strait of Hormuz shutdown, the continued US blockade of Iranian exports, and renewed attacks in the Bab el-Mandeb Strait. Global oil production fell by 1.6 mb/d month on month to 100.1 mb/d in August, with more than 10 mb/d of Gulf output still shut in. Total 2026 supply is projected at 100.7 mb/d, the lowest level the agency has forecast this year.
Saudi Arabia bore the brunt of August's deterioration. The kingdom's crude supply plunged 2.3 mb/d during the month to just 6 million bpd, its lowest level in more than three decades, after attacks hit facilities and shipping routes. OPEC+ production overall fell 1.8 mb/d to 38.8 mb/d. Total Gulf country exports in August were estimated at 13 mb/d, nearly half their pre-war level. Refined product and LPG exports from the Gulf remained nearly 60 percent, or 3.7 mb/d, below February levels, with diesel net exports from Gulf countries averaging just 390,000 bpd, barely a quarter of pre-war volumes.
Refining markets are under extreme strain. Crude throughputs reached a summer peak of 81.4 mb/d in August, up 960,000 bpd month on month, but still 4.2 mb/d below year-earlier levels. Atlantic Basin refining margins hit record levels in August, driven by a sharp squeeze on diesel and middle distillates. US diesel prices surged past $200 per barrel in early September, 94 percent above pre-war levels, with Europe and Asia not far behind. Global refinery runs are forecast to decline by 2.6 mb/d to 81.5 mb/d for the full year.
The demand picture has also deteriorated sharply. The IEA now expects global oil consumption to contract by 2.5 mb/d in 2026, a 940,000 bpd steeper decline than the 1.6 mb/d contraction it forecast in August. Record fuel prices are forcing consumers to curtail use, with losses concentrated in middle distillates and petrochemical feedstock products, particularly in Asia. That puts the IEA nearly 2.9 mb/d below OPEC on 2026 demand. OPEC said on 11 September that it still expects global oil consumption to grow by 380,000 bpd this year, in its fifth consecutive monthly downgrade. The two agencies converge for 2027, with the IEA projecting demand growth of 2.6 mb/d and OPEC seeing 2.36 million bpd.
Global observed oil inventories plunged by a further 95 million barrels in August, taking cumulative draws since February to 507 million barrels, or 2.8 mb/d on average. Oil on water volumes declined by 65 million barrels as tanker traffic out of the Middle East came under renewed attacks. Non-OECD inventories drew by 52 million barrels, led by China, while OECD stocks rose by 23 million barrels as builds in commercial tanks offset a 19 million barrel draw in government stocks.
Benchmark North Sea Dated crude prices rose by $7.61 per barrel to an average of $91.00 per barrel in August, before surging to $113.48 per barrel on 9 September. ICE Brent futures traded at $105 per barrel at the time of the IEA's writing, up $21 per barrel since the start of August and 45 percent above pre-war levels, while physical benchmarks were significantly higher. With diesel above $200 per barrel in the US and backwardation at extreme levels, the strain on consumers and industries is intensifying.
The IEA's assessment has grown materially more pessimistic since August, and the gap with OPEC on 2026 demand now exceeds the entire output of a major producing nation. If US-Iran negotiations remain deadlocked and hostilities persist, the supply-demand imbalance could deepen further before any meaningful relief emerges.
Sources
- IEA — Oil Market Report September 2026: iea.org
- OilPrice.com — IEA Sees 5.7 Million Bpd Oil Supply Plunge as Gulf Recovery Slips to 2027: oilprice.com
