The International Energy Agency (IEA) has revised its outlook for global oil supply, projecting a significant fall of 3.9 million barrels per day (bpd) in 2026, assuming oil flows through the Strait of Hormuz gradually resume from June [1]. This marks a substantial downward revision from the previous forecast, which anticipated a 1.5 million bpd decline [1]. The IEA's monthly report also indicates that world oil supply will be 1.78 million bpd lower than demand in 2026, a sharp contrast to the prior estimate of supply exceeding demand by 0.41 million bpd [1]. The closure of the Hormuz passage has resulted in a total global supply loss of 12.8 million bpd since February [1]. Additionally, global oil refinery runs are expected to decrease by 1.6 million bpd in 2026 due to attacks, reduced crude availability, and export restrictions [1]. The IEA notes that the ongoing war in the Middle East is depleting global oil inventories at a record pace, with 246 million barrels drawn down in March and April [1].
Despite these bearish supply projections, the WTI Oil price showed little immediate reaction, trading down nearly 1% to around $97.50 at the time of the IEA report's release [1]. In the European trading session on Wednesday, WTI futures corrected further to near $97.20, pressured by escalating hawkish Federal Reserve (Fed) bets following stronger-than-expected US inflation data, with the headline Consumer Price Index (CPI) rising 3.8% year-on-year versus 3.7% estimates and 3.3% in March [2]. The prospect of tighter Fed policy is seen as unfavorable for oil demand [2].
Nevertheless, the broader outlook for oil prices remains firm, underpinned by fears of a prolonged closure of the Strait of Hormuz due to stalled US-Iran negotiations [2]. Technical analysis suggests that while WTI has pulled back, the near-term bias remains constructive as prices hold above the 20-day exponential moving average (EMA) at approximately $95.80 [2]. The Relative Strength Index (RSI) around 53 indicates a neutral-to-positive tone, suggesting that upside momentum is intact but not overstretched [2]. Immediate support is seen at the 20-day EMA, with potential for renewed attempts toward the $100 level and the April 30 high of $107.35 if buyers maintain control [2].
Looking ahead, investors are focusing on the upcoming meeting between US President Donald Trump and Chinese leader Xi Jinping, scheduled for Thursday and Friday, which could influence market sentiment [2].
CONCLUSION
The IEA's sharply reduced oil supply forecast for 2026 and ongoing geopolitical risks are keeping the broader outlook for oil prices firm, despite recent pullbacks driven by demand concerns from tighter US monetary policy. While WTI remains below the $100 mark, technical indicators suggest the uptrend is intact as long as key support levels hold. Market participants are closely watching upcoming geopolitical developments for further direction.