The International Energy Agency said on Friday that global oil supply and demand would decline this year by more than it had previously forecast, as the return of Middle East flows to normal is delayed until 2027 because of the lack of progress toward resolving the war in Iran. The outlook comes as fuel prices rise and oil prices this week reach their highest level in 4 months.
Inventories have so far played a crucial role in balancing the market.
Shrinking inventories and refining pressures
In its monthly report, the agency said declining spare inventories and the global refining system operating at full capacity were increasing the need for progress toward resolving the conflict in the Middle East and the Russia-Ukraine war, which has entered its fifth year, to prevent the market's supply shortage from worsening.
In a separate estimate, the Organization of the Petroleum Exporting Countries, or OPEC, cut its forecast for global oil demand growth in 2026 to 380 thousand barrels per day, marking its fifth consecutive downward revision, according to a copy of its monthly report.
Oil heads for first weekly close above 100 dollars
Oil prices were heading for a weekly close above 100 dollars per barrel for the first time since mid-May, as attacks on key shipping routes in the Middle East intensified and concerns grew over prolonged supply disruptions.
Brent and West Texas Intermediate surrendered their early gains and turned lower during Friday trading after a report said Middle Eastern foreign ministers were leading efforts to reach an interim agreement with Iran to regulate shipping through the Strait of Hormuz. Despite the decline, both benchmarks remained up about 13% on the week, their biggest weekly gains since July 17.
Shipping through the Strait of Hormuz declines
Shipping traffic through the Strait of Hormuz declined as attacks on oil tankers intensified in recent days, while the takeover of Yemen's Mocha port by Iran-backed Houthi forces on Thursday posed an additional threat to shipping in the Red Sea. Analysts said attacks launched from Yemen against Saudi energy facilities had broadened the escalation and raised fears of prolonged disruptions in the region.
Iran said it had attacked 10 vessels near the strait on Wednesday, after the United States struck five Iranian oil tankers. Iran's Revolutionary Guard said it would escalate its response to any further attacks.
Data from vessel-tracking company Kpler showed that the number of ships transiting the strait fell to seven on Thursday from 11 the previous day, compared with an average of 15 over the past 10 days. Before the Iran war broke out on February 28, the strait typically saw about 125 large commercial vessels pass through each day and carried around 20% of daily global supplies of crude oil and liquefied natural gas.
