IEA Cuts 2026 Oil Supply Forecast Again as Hormuz Keeps Market in Deficit
The IEA now projects a 1.8 million bpd shortfall this quarter as Hormuz flows remain well below pre-war levels and global refining throughput contracts.
The IEA cut its 2026 global oil supply forecast on Wednesday (2026-08-12), projecting output will fall 4.3 million barrels per day this year. That is worse than the 3.7-million-bpd decline projected a month earlier and would leave global supply at 102.02 million bpd, the agency's lowest forecast for 2026 yet.7
The revision narrows the supply-demand balance sharply. Supply is now expected to fall 1.27 million bpd short of annual demand, against an implied deficit of 860,000 bpd in July's IEA forecasts. The quarterly shortfall reaches 1.8 million bpd in the current period as the Strait of Hormuz remains effectively closed to normal flows.7
ICE Brent crude front-month was trading at $88.19 a barrel as of 16:02 UTC on Thursday (2026-08-13), up 1.86%, while NYMEX WTI front-month gained 2.03% to $82.61. The EIA said in its August Short-Term Energy Outlook that "because of the large drawdown in global inventories triggered by continued disruptions in the Strait of Hormuz," prices will remain elevated until global oil flows return to normal.6
Middle East production remained 8.3 million bpd below pre-war levels in July (2026-07), the IEA reported, despite a brief recovery. Hormuz loadings reached 20 million bpd in early July, briefly matching pre-war rates, before falling to 12 million bpd later in the month. An 8-million-bpd swing within a single month captures how fragile that recovery proved.7
EIA data from its June Short-Term Energy Outlook put the disruption in monthly terms: shut-ins averaged 11.3 million b/d in May (2026-05) and 11.34 million b/d in June (2026-06). The agency projected partial easing to 10.11 million b/d in Q3 and 5.70 million b/d in Q4, but global production still sat around 9.4 million bpd below pre-war levels as of the IEA's most recent oil market report, even after the June rebound.4,5
Demand is deteriorating faster than earlier modelling assumed. The IEA now expects global oil consumption to contract by 1.6 million bpd in 2026, compared with a roughly 1-million-bpd decline forecast in July, as high prices and restricted refined product supply suppress activity. EIA's June STEO had estimated a 1.1-million-bpd demand reduction for the year. Both agencies have revised their demand outlooks lower in successive reports.7,2
Refining is a separate constraint, not just a symptom of the crude shortage. Global crude processing dropped 5 million bpd year-over-year in July, the IEA said. Russian refinery runs were near a 20-year low of 3.9 million bpd following Ukrainian drone attacks on processing infrastructure, tightening product markets in economies that have already found alternative crude sources.7
Asian buyers carry the heaviest physical exposure to a prolonged closure. Before the conflict, they accounted for nearly 80% of Hormuz oil flows, with China importing close to 5 million b/d through the strait and India, Japan and South Korea each taking roughly 2 million b/d, according to OGJ. The corridor moved 18.2 million b/d of crude and products in 2025. China had built an estimated 1.2 billion-plus barrels in commercial and strategic reserves before the war, but its import volumes collapsed as prices exceeded $100 a barrel, per OilPrice.com reporting. JKM Asian LNG front-month stood at $21.24/MMBtu on Thursday (2026-08-13), reflecting continued tightness in regional energy markets as buyers seek non-Middle East supply.1,3
The EIA flagged an additional shipping risk in its August STEO: recent threats to vessels transporting Saudi Arabian crude through the Bab el-Mandeb strait. The agency said it does not assume those threats have produced additional production shut-ins — but acknowledged the possibility. If that assumption holds, the supply math stays as grim as currently modelled. If it breaks, the deficit widens from an already historically large base.6
The early July rebound demonstrated the scale of the swing available if Hormuz normalises: 20 million bpd through the strait against 12 million bpd now. Whether that recovery can be sustained, with Middle East output still 8.3 million bpd below pre-war levels and Bab el-Mandeb carrying fresh operational risk, is the number traders will be watching as the IEA prepares its September report.7