Global oil demand is forecast to decline by 2.7 million barrels per day in 2026, driven by elevated fuel prices, supply disruptions and accelerating adoption of electric vehicles, according to the International Energy Agency. The agency projects that demand will average 102.3 million barrels per day this year. The pace of contraction is expected to ease in the fourth quarter to 2.7 million barrels per day year-on-year, down from an average decline of 4.4 million barrels per day in the second and third quarters of 2026.
Demand is projected to recover by two million barrels per day in 2027, driven largely by petrochemical feedstocks such as liquefied petroleum gas, ethane and naphtha, which the IEA expects to account for about 80 percent of the additional demand as supply chains normalise. By contrast, transport fuels will see only modest growth as high prices accelerate vehicle electrification and encourage fuel efficiency across the global car fleet. Global oil supply rose by 2.3 million barrels per day to 105.4 million barrels per day in October, following a three million barrels per day increase in September, with the recovery driven largely by higher Gulf exports.
The stronger supply outlook has prompted the IEA to raise its fourth-quarter 2026 forecast by 3.3 million barrels per day. Global supply is still expected to decline by an average of 4.8 million barrels per day for the full year before rebounding by 6.6 million barrels per day to 108.1 million barrels per day in 2027. The projected recovery includes a 5.3 million barrels per day increase in Gulf production and a further 1.1 million barrels per day gain from the United States, Canada, Brazil, Argentina and Guyana.
The recovery in crude supply has not yet translated into a full recovery in refined products. Global refinery supply fell by 1.3 million barrels per day month-on-month to a seasonal low of 81.3 million barrels per day in October, although the IEA expects throughput to rise to 84.7 million barrels per day in December. The agency noted that global oil demand continues to be weighed down by ongoing disruptions to exports of refined products and liquefied petroleum gas from the Gulf, remaining at roughly half of pre-war levels.
Global oil inventories increased by 52 million barrels in October, marking the first monthly rise since June, driven by an 86 million-barrel surge in oil held on water reflecting stronger crude exports from the Gulf. However, inventories held on land continued to decline and remained at their lowest level since at least 2016. The IEA warned that the outlook remains exposed to risks from continued attacks on shipping and energy infrastructure, which could undermine the recovery in exports and prolong supply disruptions. Attacks on Russian energy infrastructure are restricting the country's supplies to international markets, adding to losses from the Middle East.