The International Energy Agency reports that the oil market is likely to remain in deficit until the final quarter of the year. Disruptions at the Strait of Hormuz, caused by an Iranian blockade, have effectively cut off supply from the Persian Gulf and increased the risk of renewed price volatility.
The supply crisis has led to a significant drop in production, with Saudi Arabia reporting to OPEC that its crude oil production collapsed last month to the lowest level since 1990. According to the IEA's May report, global oil supply declined by an additional 1.8 million barrels per day in April.
Forecasts for oil demand have been revised, with the IEA now projecting growth of 1.17 million barrels a day this year, down from 1.38 million. However, the agency also expects global oil demand to contract by 420,000 barrels a day this year, compared to a previous projection of an 80,000-barrel-a-day decline. Looking further ahead, inventories are expected to decline by an average of 2.6 million barrels a day in 2026, up from a previous estimate of 300,000 barrels a day.