The International Energy Agency (IEA) cut its 2026 global oil supply outlook for a second consecutive month, forecasting on 12 August that world supply will fall by 4.3 million barrels per day (mb/d) on average this year — roughly 4 percent — to 102.02 mb/d. That is the lowest full-year supply figure the agency has projected for 2026, and a deeper cut than the 3.7 mb/d decline it expected in the July [Oil Market Report](https://www.iea.org/reports/oil-market-report-august-2026).
In the August edition of the report, the Paris-based agency said supply had fallen well below demand "due to the Strait of Hormuz shutdown, the U.S. blockade of Iranian exports, attacks within the Bab el-Mandeb Strait and reduced Kazakh CPC Blend exports," also pointing to drone attacks in the Black Sea affecting exports. The US-Iran ceasefire broke down in July, about a month after the two parties signed a memorandum of understanding, and tanker attacks in the Strait of Hormuz resumed while Yemen's Houthi rebels stepped up attacks in the Red Sea, [Reuters reported via EnergyNow](https://energynow.com/2026/08/iea-slashes-2026-supply-forecast-as-hormuz-reopening-remains-elusive/).
The IEA now expects the market to stay in deficit for the whole year: global supply is seen running 1.27 mb/d below demand in 2026, widening from the 860,000 bpd deficit implied by its July forecasts. For the third quarter, the agency projects a balance deficit of 1.8 mb/d — more than double the roughly 800,000 bpd it estimated last month — the deepest quarterly shortfall since the fourth quarter of 2021, according to data from the IEA's annual statistical supplement cited by Reuters.
Demand is being hit too. The IEA cut its 2026 global oil demand forecast by 510,000 bpd and now expects consumption to contract by 1.6 mb/d this year, after a decline of roughly 1 mb/d in its July report. Quarterly demand is seen falling 4.9 mb/d in the second quarter and 2.8 mb/d in the third, before returning to growth of 580,000 bpd in the fourth; for 2027 the agency projects demand growth of 2.4 mb/d.
On the supply side, global output rose by 2.4 mb/d in July to 101.5 mb/d but remained 6.3 mb/d below year-earlier levels, with 8.3 mb/d of Gulf output still shut in. Middle East production was 8.3 mb/d below pre-war levels in July — against 14 mb/d of lost output at the peak of the crisis — even as Gulf output recovered by 2.5 mb/d month on month to 23.9 mb/d. Middle East loadings had returned to 20 mb/d at the start of July, broadly in line with pre-war Hormuz traffic, but slipped back to around 12 mb/d later in the month. "The nascent recovery underway from mid-May narrowed the supply deficit in June, but renewed hostilities undermined trade flows and tightened the 3Q26 balance," the IEA said.
Inventories are draining fast. Global observed oil stocks fell by 69 million barrels in July — 2.2 mb/d — dipping below 7.9 billion barrels for the first time since April 2025. Cumulative draws between the end of February and the end of July reached 410 million barrels, or 2.7 mb/d on average.
Refining markets remain strained: crude throughputs rose 1.8 mb/d month on month in July to 80.9 mb/d but stayed nearly 5 mb/d below year-earlier levels, and Atlantic Basin refining margins hit all-time highs in July. Russian refinery runs hovered near a 20-year low after Ukrainian drone attacks, Reuters reported, while product exports from Russia, the Middle East and Asia ran 1.3 mb/d below year-ago levels — about 20 percent of global seaborne trade — with jet fuel exports down 670,000 bpd, or 34 percent.
Looking to next year, the IEA sees global supply outstripping demand by 4.61 mb/d in 2027 — but only assuming de-escalation in the coming months. That surplus could allow oil stocks to recover to their February 2026 level by the middle of next year, the agency said.
Sources
- IEA — Oil Market Report August 2026: https://www.iea.org/reports/oil-market-report-august-2026
- EnergyNow (Reuters) — IEA Slashes 2026 Supply Forecast as Hormuz Reopening Remains Elusive: https://energynow.com/2026/08/iea-slashes-2026-supply-forecast-as-hormuz-reopening-remains-elusive/
