BAKU, Azerbaijan, November 14. Global oil demand will decline by 2.7 million barrels per day (bpd) to 102.3 million bpd in 2026. Demand is expected to increase by 2 million bpd in 2027, according to the International Energy Agency (IEA).
The IEA's November report noted that the global oil market is projected to return to a surplus in the fourth quarter of 2026 amid the recovery in oil supplies, increased exports from the Middle East, and weaker consumption.
According to the report, the year-on-year decline in global oil demand will weaken to 2.7 million bpd in Q4 2026. In Q2 and Q3, the average decline stood at 4.4 million bpd.
The agency expects demand growth in 2027 to be driven mainly by increased consumption of liquefied petroleum gas (LPG), ethane, and naphtha. As supply chains normalize, these products will account for approximately 80% of the increase in global oil demand next year. Meanwhile, high fuel prices, vehicle electrification, and improved fuel efficiency will limit growth in oil consumption in the transport sector.
Oil supply recovers, market surplus expected
Global oil supply increased by another 2.3 million bpd in October to 105.4 million bpd, following a 3 million bpd rise in September. This growth was mainly driven by exports from Gulf countries remaining high despite continued attacks on energy infrastructure and tankers.
According to the IEA’s assessment, global oil production increased by a combined 5.3 million bpd from August through October. As a result, the year-on-year decline in production narrowed to 2.9 million bpd, compared with an average decline of 8 million bpd from March through September.
In October, oil exports from Gulf countries, excluding Oman, amounted to 18.4 million bpd. This was 26% below pre-war levels. Crude oil exports reached 15 million bpd, equivalent to 82% of the pre-war figure.
Following the recovery in export flows, the agency raised its global oil supply forecast for the fourth quarter of 2026 by 3.3 million bpd. Nevertheless, average oil supply for the full year is expected to decline by 4.8 million bpd.
In 2027, global oil supply is projected to increase by 6.6 million bpd to an average of 108.1 million bpd. Gulf countries are expected to account for 5.3 million bpd of this increase, while the US, Canada, Brazil, Argentina, and Guyana are projected to contribute another 1.1 million bpd.
The IEA's November report emphasized that the global oil market will return to a supply surplus in Q4 2026, while inventories are expected to increase more significantly in 2027. However, attacks on shipping routes and maritime security risks could slow the recovery in supply.
Oil refining and fuel inventories
Global refinery throughput declined by 1.3 million bpd month-on-month to 81.3 million bpd in October, reaching a seasonal low. The IEA expects throughput to increase to 84.7 million bpd in December.
Global refinery throughput is projected to increase by 2.5 million bpd to 84.3 million bpd in 2027. This follows an expected average annual decline of 2.2 million bpd in 2026.
The report noted that a record increase in shipping costs in October put pressure on the profit margins of Asian refineries. Although US refineries benefited from relatively cheap crude oil, falling gasoline prices limited their profitability.
Global observed oil inventories increased by 52 million barrels, or 1.7 million bpd, in October, marking the first increase since June. Oil inventories in transit at sea rose by 86 million barrels, reaching their highest level since January. This was driven by increased crude oil exports from Gulf countries.
Nevertheless, onshore oil inventories continued to decline, remaining at their lowest level since at least 2016. Total oil inventories in OECD countries fell by 47 million barrels, while industry stocks declined by 41 million barrels. Since the outbreak of the war, the cumulative decline in global observed oil inventories has reached 462 million barrels.
Oil prices decline, diesel market risks persist
The recovery in oil exports has eased market pressures to some extent. North Sea Dated crude prices, after rising to $136 per barrel in early October, fell by 32% to around $93 per barrel at the time the report was prepared. Nevertheless, prices remained $22 above pre-war levels.
Diesel prices in Europe also declined by 11% over the same period. However, at approximately $180 per barrel, they remained 77% above pre-war levels.
Freight rates for crude oil shipments from the Middle East to Asia have remained near record levels, while shipping costs for Aframax and Suezmax tankers have seen a decline.
According to an IEA report, a primary concern for the market and consumers is the severe constraint on product supplies—specifically, the failure of diesel supply to recover sufficiently. Ongoing attacks on Russia’s energy infrastructure are limiting the country’s diesel exports to international markets. This, combined with supply losses from the Middle East, is placing additional pressure on global availability.
Meanwhile, oil refineries in the Atlantic Basin, led by those in the US, are maintaining high production levels to capitalize on strong profit margins. Furthermore, improved crude oil supplies in Asia, coupled with China’s allocation of new quotas for petroleum product exports, could facilitate an increase in refining volumes within the region.
The agency noted that the accelerated release of emergency diesel stocks in the coming months will play a crucial role in addressing supply shortages until the global refining system and fuel production capacity can fully recover.
