The International Energy Agency reported on Thursday that global oil demand in 2026 is expected to rise more slowly than previously forecast, increasing by about 850,000 barrels per day below earlier projections as economic uncertainties and higher prices temper consumption.

Despite this moderation, supply remains robust, with global production exceeding demand by a significant margin as output from OPEC+ and non-OPEC producers contributes to a growing surplus.

The IEA noted that supply outages in some regions have had limited impact on the overall oversupply picture so far. Oil prices stayed relatively steady in early trading, supported by geopolitical risk premiums even as demand forecasts softened.

Traders said the report underscores the evolving balance dynamics in energy markets.

Energy equities reflected the news with mixed performance, as some producers held gains on supply discipline narratives while refining and downstream segments showed more caution.

Investors said that market participants are balancing slower demand signals with geopolitical risk factors that could influence pricing.

The oil demand outlook has broader implications for energy-dependent economies, particularly in parts of Asia and Europe where industrial activity remains sensitive to crude price movements.

Analysts emphasised that demand growth projections are influenced by macro data, inflation trends and monetary policy expectations, which can affect fuel consumption patterns in transportation and industry.

The slightly weaker demand growth forecast comes amid concerns about economic momentum in some large markets. Commodity strategists said that supply dynamics including OPEC+ decisions and U.S. shale output will be critical to near-term price direction.

Currency markets also played a role, as a firmer U.S. dollar can weigh on dollar-priced commodities, including crude.

The interplay between FX trends and energy pricing has become a focal point for traders assessing relative demand pressures across regions.

Fixed-income markets remained sensitive to inflation and rate expectations, which in turn influence commodity valuations.

Looking ahead, the oil market will closely watch the next OPEC+ meeting and incoming macro reports from major economies.

Investors said that any significant shifts in consumption or production plans could quickly alter the supply-demand outlook and pricing momentum.

Source: Reuters