IEA cuts global oil demand forecast, cites 'largest disruption in history'

(Sharecast News) - The International Energy Agency downgraded its forecast for global oil demand on Tuesday, as it highlighted "the largest disruption in history" amid the conflict in the Middle East.

The organisation now expects global demand to decline by 80,000 barrels per day this year, versus a previous forecast for growth of 640,000 bpd.

For the second quarter, demand is expected to fall by 1.5 million bpd, which would mark the sharpest drop since Covid-19 slashed fuel consumption.

The IEA said the deepest cuts in oil use have come in the Middle East and Asia Pacific, mainly for naphtha, LPG and jet fuel. However, "demand destruction" will spread as scarcity and higher prices persist, it said.

"The announcement last week of a two-week ceasefire in the conflict in the Middle East provided some welcome respite to global oil markets just as the impact of disruptions to supply and trade were spreading globally," the Paris-based organisation said.

"However, at the time of writing, it remains unclear whether the ceasefire will turn into a lasting peace and a return to regular shipping flows through the Strait of Hormuz. With oil-importing nations scrambling to source replacement barrels from an increasingly shrinking pool of supply, physical crude oil prices surged to record levels near $150/bbl, far above the prices in futures markets, with the physical-futures disconnect becoming increasingly acute.

"Even steeper gains have been seen for refined products, with middle distillate prices in Singapore reaching all-time highs above $290/bbl."