IEA Warns Global Oil Refining Stretched to Limit Amid Wars
The IEA warns that global oil refining is stretched to its limit amid wars in Iran and Ukraine, slashing supply forecasts and projecting sharp drops in oil demand.
The wars in Iran and Ukraine are intensifying pressure on the global oil refining system, which is "stretched to its absolute limit," according to a monthly report released today by the International Energy Agency (IEA). The agency once again lowered its global supply and demand forecasts amid ongoing geopolitical shocks. It now projects that global oil supply will contract by 6% this year, amounting to 5.7 million barrels per day, compared to 2025 levels. In its previous update in August, the IEA had forecast an annual decline of just 4%. Meanwhile, global oil demand is falling faster than expected against the backdrop of a diplomatic stalemate between the US and Iran, and renewed Houthi attacks in Yemen, who are nearing control of the Bab el-Mandeb strait in the Red Sea. According to the IEA report, global demand is projected to drop by 2.5 million barrels per day this year, compared to an expected decline of only 1.6 million barrels per day in the August report. "Global oil inventories have played a crucial role in balancing the market so far," the IEA report stated. "As safety nets shrink and the global oil refining system is stretched to its absolute limit, the need for progress toward resolving the Middle East conflict and the Russia-Ukraine war, now in its fifth year, is greater than ever to prevent further damage to the market and demand." Oil prices registered slight declines today but remain on track to close the week above $100 a barrel for the first time since mid-May. Brent crude lost 3% to $104.4 per barrel, while US WTI weakened by 2.6% to $99.86 per barrel.
