IEA flags steep oil inventory decline

The International Energy Agency has warned that global oil inventories are falling at a record pace, pointing to tighter market conditions in 2026. The agency now forecasts that global oil stocks will decline by 2.6 million barrels per day over the year, a sharp change from earlier expectations of a much smaller draw. The faster‑than‑expected depletion is raising concerns about the balance between supply and demand.

According to the IEA, the drawdown has already been substantial in recent months. Over March and April 2026, global inventories fell by a combined 250 million barrels, equivalent to an average of 4 million barrels per day. This rapid depletion underscores the speed at which surplus supply has been absorbed from the market.

Supply disruptions in the Middle East are a key factor behind the tightening market. The U.S. Energy Information Administration expects oil supply losses from the region to continue and to peak at 10.8 million barrels per day in May 2026. Such losses are contributing to the pronounced global inventory draws highlighted by the IEA.

The scale of the anticipated Middle Eastern supply losses has become central to forecasts for the global oil balance. With inventories already declining quickly, any prolonged disruption raises the risk that stockpiles could fall further, leaving the market more exposed to demand shocks and seasonal consumption patterns.

Tighter supply conditions have been reflected in crude price movements. Brent crude oil (UKOIL) prices are projected to average about $106 per barrel in May and June 2026. Forecasts then point to a moderation, with Brent (UKOIL) expected to average $89 per barrel in the fourth quarter of the year, suggesting some easing of market tightness later in 2026.

Spot markets for physical crude have shown even stronger gains. North Sea Dated crude prices surged by around $16.50 per barrel month over month in April 2026, reaching an average of $120.36 per barrel. This move highlights the strength of near‑term demand for physical barrels amid constrained supply and declining inventories.

The combination of rapid stock draws, sizable anticipated Middle East supply losses, and elevated spot prices points to a period of tight market conditions in the near term. The IEA has indicated that this environment could lead to further price spikes, particularly as summer demand approaches and competes for limited available supply.

At the same time, projections for Brent prices to ease by the fourth quarter suggest expectations for some rebalancing later in 2026. How quickly this occurs will depend on the evolution of supply disruptions and the pace of demand growth relative to current inventory levels.