The International Energy Agency (IEA) on Wednesday sharply reduced its forecast for global oil demand this year, with supplies still crimped by the disruption of shipping through the Strait of Hormuz and high prices deterring buyers.
Demand is expected to slump by 1.6 million barrels per day, compared with its forecast slump of one million barrels in its previous monthly report in July.
Crude prices have remained well above levels seen before the U.S. and Israeli attacks on Iran in late February, sparking a war that has seen oil infrastructure damaged in several Gulf countries and some supply routes for oil severely disrupted.
Tehran also responded by effectively shutting down tanker and cargo traffic in the Strait of Hormuz, through which around one-fifth of global oil supplies usually transit.
“The ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption,” the Paris-based IEA said.
Despite a purported ceasefire and repeated claims that a deal to open the strait was imminent – which the IEA referred to as “sudden diplomatic pivots” – only a handful of ships are being let through, leading to volatile pricing on global oil markets.
The IEA said global supplies rose by 2.4 million barrels per day in July, to reach 101.5 million barrels per day, but that was still 6.3 million per day lower than a year ago.
But “renewed hostilities and maritime disruptions in July and early August undermined the recovery efforts,” the agency said.
It now expects global supply to fall by 4.3 million barrels per day on average this year, before recovering next year.
On the demand side, the IEA is projecting a return to growth in the fourth quarter of this year.
