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IEA Predicts First Oil Demand Drop Since 2020 Amid Middle East Tensions
🇳🇴 Norway /Energy & Infrastructure

IEA Predicts First Oil Demand Drop Since 2020 Amid Middle East Tensions

From Aftenposten · () Norwegian

Translated from Norwegian, summarized and contextualized by DistantNews.

At a glance

News Official statement Context piece
  • The International Energy Agency (IEA) forecasts a global oil demand drop of about one million barrels per day this year, the first decline since 2020.
  • Escalating tensions in the Middle East, particularly around the Strait of Hormuz, create uncertainty for oil transport and market stability.
  • The IEA report highlights that a lasting peace agreement is crucial for normalizing oil markets, with recent events underscoring the risks of renewed conflict.

Global oil demand is projected to fall by approximately one million barrels per day this year, marking the first such decrease since the COVID-19 pandemic in 2020, according to a new report from the International Energy Agency (IEA).

It is not straightforward to reopen the Strait of Hormuz, after four months of Iran war and unrest surrounding the transport of oil, gas and other goods out of the Persian Gulf.

— IEA reportDescribing the challenges to normalizing oil transport through a key waterway.

The Paris-based energy advisors' latest oil market report estimates that demand will average 103.5 million barrels per day. While the IEA anticipates demand to rebound and increase by around two million barrels per day in 2027, reaching 105.5 million barrels per day, the current year's decline signals a shift in consumption patterns.

An escalation in the unrest from July 7 to 8 clouds the outlook and could end the prediction that the market will turn to surplus next year.

— IEA reportExplaining how recent events impact future market predictions.

Compounding the demand forecast is the volatile situation in the Middle East. The IEA notes that reopening the Strait of Hormuz, a critical chokepoint for oil transport, remains uncertain after months of conflict and unrest. Recent escalations in July between Iran and the United States have further clouded prospects, potentially ending predictions of a market surplus next year.

Renewed exchange of fire in the Persian Gulf this week underscores the risk of not reaching a lasting peace agreement, which is a prerequisite for the normalization of oil markets.

— IEA reportHighlighting the link between regional stability and oil market normalization.

US President Donald Trump declared an end to the 60-day ceasefire between the US and Iran following new military actions from both sides. The IEA report emphasizes that renewed exchanges of fire in the Persian Gulf highlight the risk of failing to achieve a lasting peace agreement, which is a prerequisite for the normalization of oil markets. Analysts from Rystad Energy and Arctic Securities echo these concerns, warning that the fragile situation could easily tip back into open conflict, impacting global oil supply and prices.

They are balancing on a knife's edge where this could easily tip over into new hostilities. It is not unusual for ceasefires in the Middle East to be shaky, and for violations to occur.

— Ole-Rikard Hammer, Chief Analyst at Arctic SecuritiesCommenting on the precariousness of the Middle East ceasefire.
DistantNews Editorial

Originally published by Aftenposten in Norwegian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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