Iran war projected to bring first oil demand drop since COVID

By Ben Geman

Global oil consumption is slated to dip this year as high prices and scarce supplies bring "demand destruction," the International Energy Agency projected Tuesday.

Why it matters: It's a stunning reflection of the historic throttling of supplies from the Iran war.

• IEA's projection, if it comes to pass, would be the first global decline since 2020, when the COVID pandemic halted economies worldwide.

The big picture: The agency's monthly analysis sees a modest year-over-year decline of roughly 80,000 barrels per day — but it's a sharp change from pre-war estimates of 850,000 bpd of growth in 2026.

• "Initially, the deepest cuts in oil use have come in the Middle East and Asia Pacific, mainly for naphtha, LPG and jet fuel," IEA said.

• "However, demand destruction will spread as scarcity and higher prices persist."

Stunning stat: Shipments of oil, natural gas liquids and petroleum products through the Strait of Hormuz averaged just 3.8 million bpd in early April, down from over 20 million pre-war.

• Some oil is getting out through other routes, notably added volumes in Saudi Arabia's east-west pipeline to the Red Sea.

• But the overall export loss is still north of 13 million bpd.

What we're watching: IEA head Fatih Birol didn't rule out additional coordinated releases from nations' strategic reserves beyond the phased 400 million barrel initiative that began last month.

• "I very much hope we don't need to do it, but if it is needed, we are ready to act immediately," he said at the Atlantic Council on Monday.