Countries are drawing on oil inventories and strategic reserves at a "record pace" to offset what the International Energy Agency (IEA) described on Wednesday as "unprecedented" supply disruptions caused by the Middle East war.
Global stocks were drawn down by a further 117 million barrels in April, the agency said, after a 129-million-barrel drawdown in March following the U.S. and Israeli launch of attacks against Iran.
"Rapidly shrinking buffers amid continued disruptions may herald future price spikes ahead," the agency, which advises industrialized countries, warned in its monthly report.
Tehran has effectively closed the strategic Strait of Hormuz to Gulf oil and gas exports, causing the largest oil supply crisis in history, sending oil prices skyrocketing, and forcing nations to scramble for alternative supplies.
The 32-member IEA coordinated the largest-ever release of 400 million barrels of oil from strategic reserves in March in a bid to calm markets. It said that around 164 million barrels of that total have already been released.
"The pace of emergency stock releases picked up pace in April, with further volumes set to hit the market in the coming months," the agency said.
Oil supply to plunge below demand
The report said the global oil supply will not meet total demand this year.
"With Hormuz tanker traffic still restricted, cumulative supply losses from Middle East Gulf producers already exceed 1 billion barrels with more than 14 million (barrels per day) of oil now shut in, an unprecedented supply shock," said the IEA.
The IEA forecasts imply that supply will come in 1.78 million barrels per day (bpd) below total demand in 2026, erasing a 410,000 bpd surplus projected in last month's report and a close to 4 million bpd surplus in its December report.
"Our latest supply and demand estimates imply that the market will remain severely undersupplied through the end of 3Q26, even assuming the conflict ends by early June," the Paris-based agency said, adding that the second-quarter deficit will be as stark as 6 million bpd.
The IEA's base-case forecast is for a gradual resumption of traffic through the strait from the third quarter onward, it said, which could see the market return to a "modest surplus" by the fourth quarter, allowing depleted stocks to begin to rebuild.
Overall global oil supply will fall by around 3.9 million barrels per day across 2026 due to the war, the agency said, slashing its previous forecast, which had projected a 1.5 million bpd drop.
Fears of shortages are rising with the summer travel season approaching in the Northern Hemisphere, with airlines already warning of jet fuel shortages in a matter of weeks if supply disruptions persist.
"With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period," the agency said.
Demand, consumption also under pressure
Surging prices are also weighing on the demand outlook as end users, such as petrochemical and heavy manufacturers, reduce usage.
The agency now expects global demand to shrink by 2.4 million barrels per day in the second quarter, down from its forecast of 3.5 million before the Mideast war erupted.
"Higher prices, a deteriorating economic environment and demand-saving measures will further weigh on global oil consumption" going forward, it said.
The IEA now sees demand falling by 420,000 bpd this year, compared to a previous forecast of an 80,000 bpd drop.
Consumption is also under pressure due to the war, as price spikes lead to demand destruction and slower economic growth, it said.
Oil prices were little changed on Wednesday, with Brent futures trading at $106.93 at 8:05 a.m. GMT, down 84 cents from the previous close and 1 cent higher than their level at 7:59 a.m. GMT before the report was published.
The IEA said it will publish its first supply and demand forecasts for 2027 in its June report – a delay from April caused by the war – while its 2026 annual oil report will be delayed from June 17 with no new date yet set for its release.
Later on Wednesday, rival forecaster Organization of the Petroleum Exporting Countries (OPEC) will publish its own monthly oil market report.