IEA and OPEC: oil stocks continue to tighten with a modest demand rebound forecast

The International Energy Agency (IEA) reports that mounting supply losses from the Strait of Hormuz closure are depleting global oil inventories at a record pace, while OPEC has forecast a smaller impact on demand.

In its May Oil Market Report, the IEA stated that cumulative supply losses from Gulf producers due to the Iran war have already exceeded 1 billion barrels. OPEC+ output fell by 1.74 mbpd in April compared to March, averaging 33.19 mbpd due to the Hormuz closure. The April figure includes the UAE, which left the cartel on 1 May.

OPEC cut its second-quarter oil demand forecast by a further 500,000 bpd and lowered its 2026 global oil demand outlook amid the impact of the Iran war with Israel and the US, although it said world oil demand would increase by “a healthy” 1.17 mbpd in 2026, year-on-year. Although this is lower than the previously expected 1.38 mbpd, OPEC forecasts a rebound, raising its 2027 demand growth estimate by 200,000 bpd to 1.54 million bpd.

Volatile prices

The IEA reported that benchmark oil prices had experienced “wild swings” in response to uncertainty over whether the US and Iran would soon reach a deal to end hostilities. North Sea Dated plunged from a high of $144/bbl to below $100/bbl before rebounding.

“With Hormuz tanker traffic still restricted, cumulative supply losses from Gulf producers already exceed 1 billion barrels with more than 14 mbpd of oil now shut in, an unprecedented supply shock,” it said.

“The current supply-demand gap is significantly smaller, however, as the market was already in surplus heading into the crisis while producers and consumers alike are responding to market signals.”

Second quarter dip

OPEC expects global oil demand to average 104.57 mbpd in the second quarter, down from last month’s forecast of 105.07 mbpd. According to the Monthly Oil Market Report, OPEC+ had planned to resume output increases from April, but the Strait blockade prevented this.

Meanwhile, OPEC said US crude imports dipped to a five-month low in April, averaging 5.8 mbpd in April, amid declines from the Middle East and Latin America, while US crude exports likely surged to a record high, estimated at 5.3 mbpd based on weekly data, driven by higher flows to Japan and South Korea.

Supply shifts

The IEA noted that Saudi Arabia and the UAE redirected some exports to terminals loading away from the Strait.

“At the same time, stocks from commercial and government strategic storage sites in consuming countries are flowing into markets to offset part of the losses,” it said.

The IEA also reported that producers outside the Middle East raised output and exports to record levels in response to the crisis, and that 2026 supply growth expectations from the Americas had been revised up by over 600 kbpd since the start of the year, to 1.5 mbpd on average. Atlantic Basin crude oil exports have increased by 3.5 mbpd since February, with notable gains from the US, Brazil, Canada, Kazakhstan, and Venezuela. Russia’s crude oil exports have also risen, as repeated attacks on its refineries cut domestic use.

Demand swings

OPEC stated that crude oil futures prices averaged higher month-on-month in April but remained volatile, “reflecting continued uncertainty surrounding geopolitical developments, near-term supply conditions and trade flows”.

Its Monthly Oil Market Report said: “Geopolitical developments remained the dominant driver of market sentiment.” OPEC said global economic growth “continues to show resilience for this year despite geopolitical tensions, particularly in the Middle East”. It added: “Global economic growth forecasts remain unchanged from last month’s assessment at 3.1% for 2026 and 3.2% for 2027.”

Additionally, the IEA’s monthly report noted that refiners had reduced runs and sharply scaled back crude imports, with Chinese seaborne crude imports falling by a huge 3.6 mbpd from February to April. Major import reductions were also seen in Japan, Korea, and India.

However, the IEA suggested that demand could return to growth by year-end if a peace deal is reached, allowing flows through the Strait to gradually resume from the third quarter of 2026. But it said supply would likely recover more slowly.

“As a result, the oil market remains in deficit until the final quarter of the year,” it said. “With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period.”