Global oil supply down 12.8m bpd; undersupply through Q3 2026

The International Energy Agency reported that global oil supply has dropped by 12.8 million barrels per day since hostilities began. Output from countries that ship via the Strait of Hormuz is down 14.4 million bpd from pre-war levels.

The IEA’s base case assumes shipments will gradually restart from June, but the agency projects the market will stay severely undersupplied through the end of the third quarter of 2026 even with that resumption.

The report projects the supply-demand gap will widen to about 6 million bpd from March through June. For 2026 the IEA estimates a shortfall of 1.78 million bpd, reversing last month’s estimated 410,000 bpd surplus and the nearly 4 million bpd oversupply forecast in December.

“The market will remain severely undersupplied through the end of 3Q26, even assuming the conflict ends by early June (our base case),” the report noted. “Supply begins a slow recovery from 3Q26 but does not catch up with demand until October when the balance edges into a modest surplus. That overhang barely begins to offset the stock deficit accumulated since end-February.”

The IEA calculates a cumulative oil liquids deficit of about 900 million barrels by September 2026. That total includes a coordinated release of 400 million barrels organized by the agency and member countries, leaving roughly 500 million barrels to be drawn from industry inventories. The agency estimated that restoring those stocks, including strategic reserves, would likely require an extra 1 million barrels per day of supply above expected demand growth over the next three years.

Demand forecasts also shifted. The IEA now expects global oil demand to fall by 420,000 bpd this year, larger than its prior estimate of an 80,000 bpd decline. Inventories are projected to keep falling through most of 2026, with a modest surplus only beginning to rebuild depleted stocks in the final quarter of the year.

Tight refined-product inventories — including gasoline and diesel — could complicate efforts to restock crude and refined supplies, the agency said. The IEA also cautioned that logistical bottlenecks could slow any recovery in flows. HFI Research judged the market had already crossed a breaking point by mid-April.

Since the conflict began, a number of countries have reduced fuel consumption and used emergency reserves to ease immediate shortages. Even with coordinated releases and demand reduction measures, the IEA’s analysis shows a prolonged period of constrained supply that will require higher output and time to return global inventories toward pre-crisis levels.