MORGANABLE BUSINESS / MARKETS
Global oil demand is expected to fall by 2.7 million barrels per day in 2026 as high fuel prices and supply disruptions force consumers and businesses to reduce petroleum use.
Akure —
Global oil demand is expected to fall by 2.7 million barrels per day in 2026 as high fuel prices and supply disruptions force consumers and businesses to reduce petroleum use.
The International Energy Agency (IEA) made the forecast in its November Oil Market Report, published on November 13. It expects global consumption to average 102.3 million barrels per day this year.
The outlook reflects the impact of conflict in the Middle East, which has disrupted energy flows and pushed fuel costs higher. In addition, expensive transport fuels, weaker economic activity and faster adoption of electric vehicles are changing consumption patterns.
The agency expects demand to recover in 2027, although the rebound will depend on improved supply conditions and more stable prices.
DEMAND REMAINS UNDER PRESSURE
The IEA expects the decline in oil use to ease towards the end of 2026. It forecasts a year-on-year fall of 2.7 million barrels per day in the fourth quarter, compared with an average decline of 4.4 million barrels per day across the second and third quarters. Even so, annual consumption will remain below the previous year’s level.
Disruptions to exports of refined products and liquefied petroleum gas from the Gulf have restricted supplies to several markets.
At the same time, high prices have encouraged households and companies to conserve energy, reduce journeys and seek alternatives. Transport demand has faced particular pressure as drivers and fleet operators absorb higher fuel costs.
SUPPLY DISRUPTIONS AND PRICE MOVEMENTS
The IEA’s outlook follows months of Middle East oil disruption. Attacks on energy infrastructure and shipping, alongside restrictions affecting key export routes, reduced the amount of oil and refined products reaching international markets. The conflict also increased freight costs and made deliveries less predictable.
However, supply began to recover in the autumn. The agency said global oil supply rose by 2.3 million barrels per day in October to 105.4 million barrels per day, following a three-million-barrel increase in September.
Higher Gulf exports supported the recovery, even as security risks continued to affect shipping.
As a result, the market has started to rebalance. The IEA reported that global oil supplies exceeded demand for the first time since the conflict began.
It expects supply to average about 105 million barrels per day in the fourth quarter, around 1.7 million barrels per day above demand.
This change has influenced prices. North Sea Dated crude fell by 32 per cent from a high of $136 per barrel in early October to about $93 at the time of the IEA report.
Nevertheless, prices remained above pre-conflict levels. Diesel prices also eased in Europe, although they stayed considerably higher than before the war.
Oil prices declined during the week ending November 13. Brent crude settled at $95.84 per barrel on Friday, while US West Texas Intermediate finished at $88.56.
Both benchmarks were on track for a weekly fall of about 2.5 per cent as traders weighed softer demand against recovering supply and a surplus.
A POSSIBLE RECOVERY IN 2027
Despite the expected fall this year, the IEA forecasts that global oil demand will increase by two million barrels per day in 2027.
It expects the recovery to follow improved supply chains and a gradual return to more normal trade flows. However, it does not expect every fuel category to recover at the same pace.
Petrochemical feedstocks are expected to drive much of the increase. LPG, ethane and naphtha could account for about 80 per cent of additional demand next year as supply chains normalise. These products serve as inputs for plastics and chemicals.
By contrast, demand for transport fuels is likely to grow only modestly. High prices, wider electric vehicle adoption and better fuel efficiency will continue to limit growth in petrol and diesel consumption.
Therefore, a recovery in overall oil demand may not produce equally strong growth across every part of the energy market.
IMPLICATIONS FOR PRODUCERS AND CONSUMERS
The demand outlook creates a difficult balance for oil-producing countries. Lower consumption can limit revenue, particularly for exporters that depend on crude sales to fund public spending.
At the same time, supply disruptions can support prices even when buyers reduce purchases. Producers must therefore weigh market conditions carefully when setting output plans.
For importing countries, lower crude prices could eventually reduce fuel costs and ease pressure on households and businesses.
However, the benefit may take time to reach consumers because transport, refining, insurance and distribution costs also affect pump prices. Local currency movements and taxes can further influence the final price paid by motorists.
The situation is important for developing economies that spend heavily on imported petroleum products.
High international prices can increase import bills, pressure foreign exchange reserves and raise transport costs.
These effects can feed into food prices and the wider cost of living. A sustained fall in oil prices could offer relief, although exchange rate pressures may reduce the benefit.
MARKET WATCH
The IEA’s forecast points to a market shaped by weaker consumption and recovering supply. Its report suggests that the balance could move further towards surplus if Gulf exports continue to improve while high prices restrain demand.
It projects global supply to rise by 6.6 million barrels per day in 2027, reaching an average of 108.1 million barrels per day.
For now, the key question is whether supply can recover without another major disruption and whether lower prices can encourage consumption.
The IEA’s latest figures show that high fuel costs have contributed to a sharp reduction in global oil use. However, its 2027 forecast suggests demand could strengthen once supply chains improve and market conditions become more stable.
