Global oil supply rebounds in June as Hormuz shipments recover, IEA says

WASHINGTON: Global oil supply recorded its biggest month-on-month increase in several months in June as shipments through the Strait of Hormuz resumed, helping lift production in the Gulf, according to the International Energy Agency's latest Oil Market Report.

The IEA said output remained far below levels seen before the US-Israel-Iran war because security-related disruptions continued to affect the region. It also raised its oil supply and demand projections, saying market conditions had improved after the US-Iran framework agreement, while cautioning that geopolitical risks in the Gulf still cloud the outlook.

Global oil production was still about 9.4 million barrels per day below pre-war levels despite the June recovery. Oil supply from Gulf producers increased by around 3.5 million bpd during the month after output partially recovered following the agreement between Washington and Tehran. Even so, periodic shipping disruptions through the Strait of Hormuz continued because of security concerns and the ongoing use of US naval escorts, leaving regional oil production about 11.4 million bpd below pre-war levels.

Production from OPEC+ rose by around 2.45 million bpd in June to 38.39 million bpd. Saudi Arabia contributed roughly 900,000 bpd of that increase, while Kuwait added around 630,000 bpd. Output from producers outside OPEC+ climbed by around 1.63 million bpd to 60.37 million bpd, with the United Arab Emirates accounting for more than half of that gain at about 940,000 bpd.

Supply outlook revised upward

The IEA said global oil supply is now expected to average 102.6 million bpd this year if transit through the Strait of Hormuz continues to recover. That estimate still points to a year-on-year decline of around 3.7 million bpd, but it is 210,000 bpd higher than the agency's previous forecast.

The agency said risks remain significant as negotiations continue over the future administration of the Strait of Hormuz and attacks in the region have not completely stopped. Looking further ahead, it projected that global oil production would rebound by around 7.5 million bpd to 110.1 million bpd in 2027.

Demand forecast for 2026 also raised

The IEA also lifted its forecast for global oil demand in 2026 by 70,000 bpd from its earlier estimate, citing stronger-than-expected oil deliveries in the second quarter. Under the revised outlook, global oil demand is expected to decline by around 1 million bpd year-on-year to 103.46 million bpd in 2026, which would mark the first annual decline since 2020, when the Covid-19 pandemic severely disrupted energy markets.

Global oil demand dropped by 5.3 million bpd year-on-year to 97.9 million bpd in May, the lowest level so far this year. Demand has since started to recover after the mid-June US-Iran agreement helped restore oil exports through the Strait of Hormuz and released pent-up demand across Asia. Lower oil prices and a better global economic outlook also supported consumption, according to the IEA.

The agency maintained its projection for global oil demand growth in 2027 at around 2 million bpd, which would take total consumption to 105.47 million bpd. Average annual demand growth between 2025 and 2027 is expected to be around 480,000 bpd, well below historical trends.