The International Energy Agency (IEA) expects a sharper decline in global oil demand and a rapid drawdown of stockpiles due to the impact of the Iran war, according to its monthly report published on Wednesday.
With supply tightening, global crude demand is projected to fall by an average of 420,000 barrels per day this year to around 104 million barrels per day. In its previous report, the Paris-based IEA had forecast a much smaller decline of 80,000 barrels per day.
The agency warned of demand destruction driven by a surge in oil prices since the start of the conflict. Benchmark Brent crude briefly rose above $120 per barrel in March, up from around $70 before the war, and is now trading around $106.
The conflict has effectively shut down the Strait of Hormuz, a key global trade route, largely disrupting flows of crude oil, natural gas and refined fuels from the Gulf and fuelling concerns about global economic growth while keeping prices elevated.
Amid local supply shortages, governments and companies are working to curb oil consumption through measures such as conservation, price controls and rationing, the report said.
Global crude inventories are also falling at a record pace and are expected to continue declining for months. Despite the release of emergency reserves by major economies including the United States, Japan and Germany, global stockpiles fell by around 4 million barrels per day in March and April.
The oil market is expected to remain significantly undersupplied through October, the IEA said, even if the conflict were to end as early as next month.
