IEA Warns of Sharp Drop in Global Oil Stocks

The International Energy Agency (IEA) warned Wednesday that global oil stocks have sharply declined due to renewed disruptions in the Strait of Hormuz. According to the IEA's August Oil Market Report, inventories fell by 69 million barrels in July to just under 7.9 billion barrels.

The closure has severely impacted exports from Gulf producers including Saudi Arabia, Kuwait, Bahrain, and the UAE. President Donald Trump ordered a release of 172 million barrels from U.S. Strategic Petroleum Reserve in March as an emergency measure. Despite efforts to use alternative routes and draw down inventories, the IEA cautioned that previously available supply buffers are rapidly depleting.

The U.S. Energy Information Administration (EIA) reported that about 5.5 million barrels per day of Middle East oil output was shut-in during July, reducing global supply and driving prices to multi-year highs. The EIA expects some production losses may persist through 2027 even if trade patterns normalize by early next year.

The IEA also warned that demand destruction is accelerating due to continued Strait closures and high fuel prices. It forecasted a 1.6 million barrels per day drop in global oil demand for 2026, up from previous estimates of 1 million barrels per day. However, the agency anticipated market contraction would slow with demand expected to grow by 2.4 million barrels per day in 2027.

The IEA noted that overall production is projected to fall more sharply than demand this year but rebound to outpace it in 2027. July saw a 2.4 million barrel per day increase to 101.5 million barrels per day, though this remained well below the 6.3 million barrels per day growth pace seen in July 2025, with 8.3 million barrels per day of Persian Gulf output still shut-in.

The price of crude oil declined on Thursday after the IEA projected a decline in demand later this year. Brent crude oil prices fell by $0.45 to $88.53 per barrel, and West Texas Intermediate futures dropped 54 cents to $82.73. The IEA's report highlighted that crude oil prices hit a two-month high in July following the collapse of peace talks between the United States and Iran.

OPEC also published its August report, forecasting an increase of about 600,000 barrels per day in oil demand, down from its previous estimate. OPEC's forecast for 2027 calls for a growth of about 2.2 million barrels per day. The United States increased its crude oil stockpile by 17.4 million barrels last week, contributing to the fall in oil prices.