IEA sees first oil demand drop since 2020

The International Energy Agency expects global oil demand to fall by about 1 million barrels per day in 2026, the first annual decline since the COVID-19-related downturn in 2020. The projection points to a shift in the oil market after several years of recovery, reflecting the impact of high prices and disrupted supply on consumption patterns.

In its latest assessment, the agency highlights that the anticipated decline is significant in both scale and timing, coming after a period when demand had been rebounding from the pandemic shock. The outlook suggests that structural and price-related pressures are now strong enough to reverse that trend on a global basis.

The demand slowdown was already evident in May 2026, when global oil consumption averaged 97.9 million barrels per day. This level was 5.3 million barrels per day lower than in May a year earlier, underlining how quickly consumption has cooled.

The reported figures indicate that much of the recent weakness has been outside the United States, with particular softness in some major consuming regions. The May data serve as a reference point for the IEA’s full-year outlook, showing that the demand contraction is not only forecast but already visible in monthly numbers.

While global oil demand is easing, U.S. gasoline use increased in the second quarter of 2026. This rise came even as average prices for a gallon of regular gasoline exceeded $4.50 in May, based on AAA data.

The resilience of U.S. gasoline demand contrasts with the broader global picture of weakening consumption. It suggests that domestic driving activity and fuel use have remained robust despite elevated costs at the pump, making the United States a notable exception to the global downturn in demand.

Geopolitical risks continue to influence the oil market outlook, particularly around the Strait of Hormuz, a key shipping route for energy supplies. U.S. officials have stated they are demanding that Iran publicly declare an end to attacks on ships to secure safe passage.

Restoring normal navigation through this corridor is presented as an important step toward reducing strains on global energy markets. While the IEA’s demand projections are grounded in current data, the broader environment remains sensitive to developments that could affect both supply routes and market confidence.