IEA Lowers 2026 Oil Demand Forecast on Economic Uncertainty, Higher Prices
•February 12, 2026
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Why It Matters
The revision signals tighter demand fundamentals and a pivot toward petrochemicals, reshaping price dynamics and investment strategies across the energy sector. Elevated inventories and supply volatility heighten market uncertainty for producers, refiners, and policymakers.
Key Takeaways
- •IEA trims 2026 demand growth to 850,000 b/d.
- •Non‑OECD, especially China, drives entire demand increase.
- •Petrochemical feedstocks now >50% of demand growth.
- •Supply dip of 1.2 million b/d in Jan expected to rebound.
- •Global inventories surged, creating price floor despite surplus.
Pulse Analysis
The IEA’s modest downgrade of 2026 oil demand underscores a broader shift in the energy landscape, where economic headwinds and price spikes are curbing traditional consumption growth. While non‑OECD markets, led by China, remain the sole source of demand expansion, the composition of that growth is evolving. Petrochemical feedstocks now dominate, reflecting rising demand for plastics and chemicals, and reducing reliance on transport fuels that historically drove oil consumption. This structural change signals a longer‑term rebalancing of the market, prompting analysts to adjust demand models and investors to reconsider exposure to conventional oil assets.
On the supply side, January’s abrupt 1.2 million‑barrel‑per‑day drop highlighted the fragility of global production amid extreme weather, geopolitical tensions, and sanctions on key exporters. Despite the temporary shock, the IEA projects a robust rebound, with total output climbing to 108.6 million barrels per day by 2026, assuming OPEC+ maintains its current output framework. The surge in inventories—up 477 million barrels in 2025—has created a cushion that stabilizes prices, even as regional bottlenecks persist. This inventory build, especially in China, acts as a floor for crude prices, mitigating the impact of short‑term supply disruptions.
For market participants, the confluence of subdued demand growth, a petrochemical‑centric consumption pattern, and ample stockpiles reshapes risk assessments. Refiners may face tighter margins as fuel demand lags, while petrochemical producers could benefit from sustained feedstock availability. Policymakers must balance sanctions and energy security, recognizing that supply shocks can quickly reverse if geopolitical conditions improve. Investors should monitor OPEC+ compliance, weather‑related production risks, and the evolving demand mix to navigate potential volatility in the oil market over the next two years.
IEA lowers 2026 oil demand forecast on economic uncertainty, higher prices
Oil prices surged in early 2026 due to supply disruptions from weather, sanctions, and geopolitical tensions, but recent negotiations and strategic adjustments are expected to stabilize the market, with supply rebounding and inventories increasing.
3 min read
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International Energy Agency lowers 2026 oil demand forecast on economic uncertainty, higher prices
In its February 2026 Oil Market Report, the International Energy Agency (IEA) projects global oil demand will increase by 850,000 b/d in 2026, up from 770,000 b/d in 2025, though the forecast has been slightly revised downward due to economic uncertainty and higher prices.
In January, benchmark crude oil prices surged by $10/bbl due to tightening spot crude oil markets caused by multiple supply disruptions and escalating geopolitical tensions between Iran and the US. In early February, prices retreated somewhat following reports of progress in de‑escalation negotiations, but rebounded rapidly after the US advised ships to avoid Iranian waters when navigating the Strait of Hormuz.
As in 2025, non‑OECD economies will account for the entire increase, with China remaining the largest contributor at roughly 200,000 b/d, albeit well below its average growth over the past decade. Demand gains are expected to be increasingly driven by petrochemical feedstocks, which will represent more than half of the increase, compared with only about one‑third in 2025 when transport fuels dominated growth.
Global oil supply fell sharply by 1.2 million b/d in January to 106.6 million b/d, impacted by extreme winter weather that halted over 1 million b/d of oil production in North America. Combined with reduced supplies from Kazakhstan, Russia, and Venezuela due to production stoppages and export restrictions, this resulted in a significant drop in global oil supply. Despite the temporary disruption, supply is expected to rebound in the coming months. Global oil production is projected to increase by nearly 3.1 million b/d in 2025 and by another 2.4 million b/d in 2026, reaching 108.6 million b/d. Assuming OPEC+ maintains its current production agreement, growth from non‑OPEC+ and OPEC+ producing countries will be roughly equivalent.
Supply losses were compounded by prolonged disruptions at Kazakhstan’s key export terminal, along with a power outage at the country’s largest oil field, tightening Atlantic Basin light crude availability.
Russian supply declined by about 350,000 b/d in January, as US pressure and broader EU sanctions disrupted flows. Indian imports of Russian crude fell to 1.1 million b/d in January, the lowest level since November 2022 and down from an average of 1.7 million b/d in 2025, while Russian deliveries into China climbed to a record high. Venezuelan crude output dropped by 210 kb/d month‑on‑month to 780,000 b/d, though production is expected to recover after Washington authorized a pathway for US‑incorporated companies to export Venezuelan oil.
Global refinery crude throughputs eased from an all‑time high of 86.3 million b/d in December to 85.7 million b/d in January, as seasonal maintenance and weaker margins weighed on activity. Crude runs are forecast to rise by an average 790,000 b/d in 2026 to 84.6 million b/d, led by non‑OECD regions, compared with an increase of nearly 1 million b/d in 2025. Margins weakened further in January as December’s higher refinery runs reduced product market tightness.
Observed global oil inventories increased by 37 million bbl in December, bringing total 2025 stock builds to an exceptional 477 million bbl, the strongest annual increase since 2020. China accounted for a major share, with crude inventories rising by 111 million bbl, while oil on water expanded by 248 million bbl, including 72 % linked to sanctioned barrels. OECD industry stocks rose by a counter‑seasonal 3.9 million bbl in December, pushing them above the 5‑year average for the first time since 2021. Preliminary data indicate global inventories surged by another 49 million bbl in January. Despite the overall surplus, relatively tight crude stocks in key pricing hubs have helped provide a floor under prices.
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