Oil Prices Drop Sharply After IEA Cuts Global Demand Forecast
Oil prices fell by more than $1 per barrel on Thursday, as investors reacted to the International Energy Agency’s (IEA) decision to lower its global oil demand forecast for 2026. The downward revision outweighed easing geopolitical tensions related to the risk of potential U.S. military action against Iran.
By 10:16 a.m. CDT (16:16 GMT), Brent crude declined $1.26, or 1.82%, to $68.14 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude dropped $1.24, or 1.92%, to $63.39.
IEA Sees Slower Oil Demand Growth
In its latest monthly report, the IEA stated that global oil demand is expected to grow at a slower pace this year than previously projected. Despite supply disruptions that reduced output in January, the agency anticipates a significant market surplus in 2026.
Following the report’s release, both Brent and WTI benchmarks erased earlier gains and moved into negative territory. Earlier support had come from geopolitical uncertainty surrounding U.S.-Iran relations, but sentiment shifted quickly after the demand downgrade.
According to Phil Flynn, senior analyst at the Price Futures Group, the market momentum faded as traders increasingly focused on the weaker demand outlook.
U.S.-Iran Tensions Remain in Focus
Geopolitical developments had initially supported oil prices. On Wednesday, U.S. President Donald Trump said after discussions with Israeli Prime Minister Benjamin Netanyahu that no final agreement had been reached regarding Iran. However, negotiations with Tehran are set to continue.
Earlier in the week, Trump indicated that he was considering deploying a second aircraft carrier to the Middle East if diplomatic efforts fail. Details regarding the next round of talks have not yet been announced.
Rising U.S. Crude Inventories Add Pressure
Oil prices were also weighed down by a substantial increase in U.S. crude stockpiles. The Energy Information Administration (EIA) reported that crude inventories rose by 8.5 million barrels last week, reaching 428.8 million barrels. This figure significantly exceeded analysts’ expectations of a 793,000-barrel increase.
In addition, U.S. refinery utilization rates declined by 1.1 percentage points to 89.4%, further contributing to concerns about short-term demand.
Russian Exports Edge Higher
On the supply side, Russia’s seaborne oil product exports increased by 0.7% in January compared with December, reaching 9.12 million metric tons. Higher fuel production and seasonally weaker domestic demand contributed to the rise, according to industry data and Reuters calculations.
