1. Based on EIA estimates, global oil demand in Q1 2026 declined quarter-on-quarter, reaching 103.5 million bbl/d. The full-year demand average for 2025 was 104.0 million bbl/d (a 1.1% increase vs 2024). Year-on-year growth was driven chiefly by other Asian countries, China, India, and the United States.
Analysts hold differing views on potential oil demand in 2026. According to the EIA and OPEC, demand is expected to rise compared to 2025 by 0.6 million bbl/d and 1.4 million bbl/d respectively, whereas IEA forecasts a slight decline of 0.08 million bbl/d. Overall, demand forecasts have been revised downwards, due to supply shortages following the blockade of the Strait of Hormuz.
Nevertheless, international analysts anticipate a gradual recovery in demand in 2027.
2. The 2026 Iran war, and consequent blockade of the Strait of Hormuz, has had a dramatic impact on oil supplies.
The EIA estimates a decline in the oil supply of 4.3 million bbl/d in Q1 2026 and anticipates a further drop in Q2 2026, to a record low of 99.2 million bbl/d. In Q1 2026 supply contracted most sharply in Iraq, the United States, Saudi Arabia, and the UAE.
On an annual basis, the EIA forecasts total global oil supply at 104.3 million bbl/d in 2026 and 109.5 million bbl/d in 2027. The key drivers of supply growth are expected to be Brazil, the United States, Canada, and Argentina.
A short-term recovery in supply will depend entirely on the trajectory of 2026 Iran war and Strait of Hormuz blockade
3. Despite a significant decline in supply, the oil market on average saw a slight surplus in Q1 2026, on account of excess production in January and February.
A peak oil shortage is expected in Q2 2026, though this will depend on how long the Strait of Hormuz situation continues and how bad the damage is to the Middle Eastern oil infrastructure. Southeast Asian countries are particularly vulnerable, due to their reliance on crude oil and petroleum products from the Middle East and India.
4. In the short term, Brent crude prices will be driven primarily by geopolitical developments and how easily buyers can access physical crude oil.
Should the conflict in the Middle East persist in the second half of 2026, average annual Brent prices could exceed USD 100 per barrel. The effects of this price shock are expected to linger through 2027, with a stabilisation of global oil prices expected in 2028.
The current long-term consensus forecast (post-2030) for Brent crude stands at USD 72.1 per barrel in real terms expressed in 2026 prices, which is broadly consistent with long-term analysts forecasts in recent years.
