Global oil demand is expected to grow more modestly in 2026, while supply gains are also set to slow following weather-related disruptions and production setbacks earlier this year, according to the International Energy Agency.
In its latest monthly report, the IEA said worldwide oil supply slipped to 106.6 million barrels per day in January, down 1.2 million bpd from December levels. The decline was largely attributed to severe winter storms in parts of the United States, an outage at Kazakhstan’s giant Tengiz field, and export constraints affecting major producers such as Russia and Venezuela.
Russian output alone fell by around 350,000 bpd, reflecting continued sanctions pressure from the U.S. and European Union amid the war in Ukraine. Venezuelan production also decreased, although it is expected to recover after Washington allowed a pathway for U.S. firms and U.S.-based subsidiaries of international companies to resume exporting Venezuelan crude.
Looking ahead, global oil supply in 2026 is projected to rise by 2.4 million bpd to 108.6 million bpd. The increase is expected to be evenly split between members of the Organization of the Petroleum Exporting Countries — which recently agreed with its allies to extend existing production quotas through March — and non-OPEC producers. In 2025, global supply expanded by nearly 3.1 million bpd.
Concerns about tighter supply, coupled with renewed tensions between the United States and Iran, helped push benchmark oil prices up by roughly $10 per barrel in January. Prices eased briefly on reports of diplomatic progress aimed at lowering tensions, but later rebounded after the U.S. advised ships navigating the Strait of Hormuz to avoid Iranian waters, the IEA noted.
Although both Washington and Tehran have signaled some headway in talks, no definitive agreement has been reached on Iran’s nuclear program, leaving markets wary of potential supply disruptions from the Middle East.
On the demand side, the IEA trimmed its forecast for annual growth slightly to 850,000 bpd, citing the drag from higher crude prices and broader economic uncertainty. China is still expected to account for the largest share of incremental demand, though its expansion will remain well below the average pace seen over the past decade.
Despite slower demand growth, the agency indicated that the market could face a substantial supply surplus in 2026 — a trend that has been developing since OPEC and its partners began gradually restoring production in April 2025 after a prolonged period of output cuts. Rising U.S. production has also contributed to the expanding supply outlook.