Global Oil Demand Forecast Lowered Amid Iran War Concerns

The International Energy Agency (IEA) has reduced its global oil demand forecast for the year, attributing the downward revision to the ongoing conflict in Iran. The agency noted that the war is contributing to rising fuel prices, constrained oil supplies, and a weakening economic outlook.

The IEA's latest report indicates a projected drop of 2.5 million barrels per day year-over-year in the fourth quarter and an average daily decrease of 2.6 million barrels for the entire year. Diesel is expected to be the largest contributor to this decline, accounting for 25% of the reduction.

While the agency anticipates a partial recovery of 2 million barrels per day next year, this would still leave global oil consumption 0.6% below 2025 levels.

In September, global oil production increased by 2.5 million barrels per day month-over-month, reaching 102.3 million barrels per day. This rise was primarily driven by producers in the Gulf region, with OPEC+ countries contributing 2.1 million barrels per day, largely led by Saudi Arabia. Non-OPEC+ increases were mainly attributed to the United Arab Emirates.

However, oil supply is forecast to decrease by 5.8 million barrels per day to 100.7 million barrels per day this year. The IEA warned that renewed attacks in the Gulf region could jeopardize the fragile recovery of oil supply, which is expected to rebound by 7.7 million barrels per day next year.

Despite a recent dip in U.S. gasoline prices, they remain higher than a month ago, averaging $4.33 per gallon on Wednesday, according to AAA. International oil benchmarks have seen fluctuations, with Brent crude gaining 0.6% to $106.37 a barrel and benchmark U.S. crude rising 1.2% to $95.30 a barrel.

Brent crude has been trading between $96 and nearly $110 over the past month, reflecting uncertainty surrounding the impact of the conflict with Iran on the global energy market.

Recent actions by the U.S. and international bodies aim to stabilize oil prices. President Donald Trump announced an agreement with Russian President Vladimir Putin to supply the U.S. with over 300,000 tons of diesel immediately, followed by additional supplies later in the year. However, energy policy experts suggest this pact may not significantly lower prices.

The price of diesel has reached record highs recently, contributing to broader inflation for consumer goods. In response, the Group of Seven wealthy democracies announced plans to release 100 million barrels of oil and fuel products, with a focus on diesel. This initiative follows a March announcement by IEA member countries to release 426 million barrels of oil and products to stabilize the market, with European Union countries committing a significant portion of refined products like diesel.