IEA sees oil demand surge 2.4mbpd in 2027 as global supply

Global oil demand is projected to rebound by 2.4 million barrels per day (mb/d) in 2027, even as the International Energy Agency (IEA) expects demand to contract by 1.6mb/d in 2026 amid severe supply disruptions, elevated fuel prices and prolonged instability around the Strait of Hormuz.

In its latest Oil Market Report, the IEA cut its 2026 demand forecast by 510,000bpd, reflecting the impact of disruptions to global energy flows.

The agency expects the contraction to ease from 4.9mb/d in Q2 to 2.8mb/d in Q3, before demand returns to growth in the final quarter, when it is projected to rise by 580,000bpd.

The recovery is occurring against a much tighter supply backdrop.

Global oil supply increased 2.4mb/d to 101.5mb/d in July, but remained 6.3mb/d below year-earlier levels, with 8.3mb/d of Gulf production still shut in.

The IEA cut its Q3 supply forecast by 1.7mb/d and expects global supply to decline by 4.3mb/d on average in 2026 before rebounding by 8.3mb/d in 2027 to 110.3mb/d.

The Strait of Hormuz remains central to the disruption. Gulf production rose by 2.5mb/d in July to 23.9mb/d, following a 3.7mb/d increase in June, but remained 8.3mb/d below pre-war levels.

Regional exports, including alternative routes bypassing Hormuz, fell 2.1mb/d to 15mb/d, while oil loadings dropped from a peak of 20mb/d in early July to about 12mb/d later in the month.

The IEA said production growth of 1.4mb/d from the Americas would only partly offset losses in the Middle East and Russia.

Refining markets are also tightening. Global refinery crude throughput rose 1.8mb/d in July to 80.9mb/d, but remained nearly 5mb/d below year-earlier levels.

The agency cut its Q3 refinery-run estimate by another 370,000bpd, citing disruptions to Middle Eastern product exports and attacks on Russian refineries. Global refinery throughput is expected to fall 2.5mb/d in 2026 before recovering by 3.5mb/d in 2027.

The supply squeeze has depleted inventories rapidly. Global observed oil stocks fell 69 million barrels in July, while cumulative withdrawals since the end of February reached 410 million barrels, equivalent to an average decline of 2.7mb/d.

By the end of July, total observed inventories had fallen below 7.9 billion barrels, the lowest level since April 2025.

Crude prices responded sharply, with North Sea Dated crude gaining $25.67 a barrel in July to $96.80, after trading as high as $105 on July 23.

The IEA now expects the global oil market to record a 1.8mb/d deficit in Q3 2026, more than twice its earlier estimate of 800,000bpd.

For oil producers such as Nigeria, higher prices and stronger demand in 2027 could improve export earnings, government revenue and foreign-exchange inflows. But capturing that opportunity will depend on maintaining crude output and reliable export infrastructure.

The bigger warning from the IEA is that global demand may rebound faster than supply resilience is restored. With inventories already depleted and geopolitical risks unresolved, the projected 2.4mb/d increase in 2027 demand could leave the oil market vulnerable to another major price shock.