Iran war projected to bring first oil demand drop since COVID
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Global oil consumption is slated to dip this year as high prices and scarce supplies bring "demand destruction," the International Energy Agency projected Tuesday.
Why it matters: It's a stunning reflection of the historic throttling of supplies from the Iran war.
- IEA's projection, if it comes to pass, would be the first global decline since 2020, when the COVID pandemic disrupted economies worldwide.
The big picture: The agency's monthly analysis sees a modest year-over-year decline of roughly 80,000 barrels per day — but it's a sharp change from pre-war estimates of 850,000 bpd of growth in 2026.
- "Initially, the deepest cuts in oil use have come in the Middle East and Asia Pacific, mainly for naphtha, LPG and jet fuel," IEA said.
- "However, demand destruction will spread as scarcity and higher prices persist."
Stunning stat: Shipments of oil, natural gas liquids and petroleum products through the Strait of Hormuz averaged just 3.8 million bpd in early April, down from over 20 million pre-war.
- Some oil is getting out through other routes, notably added volumes in Saudi Arabia's east-west pipeline to the Red Sea.
- But the overall export loss is still north of 13 million bpd.
What we're watching: IEA head Fatih Birol didn't rule out additional coordinated releases from nations' strategic reserves beyond the phased 400 million barrel initiative that began last month.
- "I very much hope we don't need to do it, but if it is needed, we are ready to act immediately," he said at the Atlantic Council on Monday.
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