Global oil demand is expected to decline by 2.6 mn barrels per day (mb/d) in 2026, with diesel accounting for 25 per cent of the fall, according to the International Energy Agency (IEA). The agency attributed the contraction to fuel shortages, higher prices and worsening economic conditions linked to the Iran war.

The IEA said demand would partially recover by 2 mn barrels per day in 2027. However, global oil use would remain 620,000 barrels per day, or 0.6 per cent, below 2025 levels, reflecting continued pressure on consumption and economic activity.

Global oil supply rose by 2.5 mn barrels per day month-on-month to 102.3 mn barrels per day in September, driven mainly by Gulf producers. OPEC+ output increased by 2.1 mn barrels per day, led by Saudi Arabia, while the UAE contributed most of the growth outside the group.

The agency projected average global supply to decline by 5.8 mn barrels per day to 100.7 mn barrels per day in 2026 before rebounding by 7.7 mn barrels per day in 2027. It cautioned that renewed attacks in the Gulf had left the recovery vulnerable. Higher shipping and crude costs also squeezed refinery margins in Europe and Asia, while discounted feedstocks lifted US margins.

Global refinery runs are set to reach a seasonal low of 81.3 mn barrels per day in October before rising to 84.6 mn barrels per day by year-end. Overall runs are forecast to fall by 2.3 mn barrels per day this year and increase by 2.8 mn barrels per day in 2027. Diesel markets remain under pressure as supply disruptions reduce inventories ahead of refinery maintenance and winter demand. Diesel exports fell by 700,000 barrels per day year-on-year in September, while global observed oil inventories declined by 10 mn barrels.