Al-Riyadh newspaper | OPEC reduces its forecast for global oil demand growth in 2026

Average crude oil production from OPEC+ countries reached 33.13 million barrels per day

On Thursday, OPEC lowered its forecast for global oil demand growth in 2026 to 970,000 barrels per day, according to its monthly report, marking the second consecutive downward revision. The organization still sees a smaller impact on consumption since the start of the Iranian war compared to the expectations of other bodies such as the US Energy Information Administration and the International Energy Agency. OPEC indicated that consumption will recover later, and raised its demand growth forecast for 2027.

The war effectively closed the Strait of Hormuz, one of the world’s most important oil passages, reducing Middle East production by millions of barrels. The resulting rise in fuel prices affects consumers and businesses around the world.

Current forecasts have reduced oil demand growth this year from 1.17 million barrels per day as previously expected. OPEC expects oil demand to rise in 2027 by 1.73 million barrels per day, an increase of 190,000 barrels per day over previous expectations.

“Global economic performance remained strong in the first half of 2026, despite ongoing geopolitical tensions,” OPEC said in its report, while keeping its economic growth forecast unchanged. Both the US Energy Information Administration and the International Energy Agency expect oil demand to decline this year as a result of the war.

The OPEC+ alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, had agreed to resume increasing production starting in April, but the closure of the Strait of Hormuz prevented this. The report indicated a further decline in production in May.

Crude oil production from OPEC+ countries averaged 33.13 million barrels per day in May, down 190,000 barrels per day from April, according to the report, which was based on secondary sources that OPEC uses to monitor its production. Iran recorded the largest decline in production. Oil tanker data indicate a sharp decline in the country’s exports in May due to the US blockade. The May figure includes the United Arab Emirates, which withdrew from OPEC and OPEC+ on May 1.

For his part, Anas bin Faisal Al-Hajji, an economist specializing in the field of energy, said that global demand for oil has declined significantly recently, which has led to a significant reduction in the gap between supply and demand. This contraction explains the decline in oil prices over the past period, as well as their failure to rise clearly despite Iran and Israel exchanging attacks two days ago. The slowdown in the Chinese economy played a pivotal role in this decline, which raises many questions, especially since Beijing is considered the least affected by the repercussions of the Strait of Hormuz crisis.

Some analysts and commentators are currently committing a common mistake, which is to focus on the difference between the volume of oil supply before the crisis and after it, and to talk about a loss of approximately 15 million barrels per day. Some even say that “more than a billion barrels have been lost so far without prices rising as expected.” This proposal is inaccurate from both a theoretical and practical standpoint, because the correct criterion is not comparing the current supply to what it was before the crisis, but rather measuring the actual difference between supply and demand, as it is the decisive factor in determining the direction of prices.

The world witnessed the loss of about 15 million barrels per day as a result of the closure of the Strait of Hormuz, but the bulk of these quantities were compensated through alternative routes. Saudi Arabia and the UAE have redirected their exports through pipelines by approximately 4 million barrels per day, and strategic and commercial reserves have been withdrawn by approximately 3 million barrels per day. In addition, China reduced its oil imports by 5.7 million barrels per day, in addition to a decline in global demand for oil due to high prices and scarcity of supplies by nearly one million barrels per day. According to these data, the actual deficit in the market does not exceed one to two million barrels per day only. All of these numbers are approximate, and their purpose is to clarify that price movement is determined according to the relationship between supply and demand, not according to comparing production to what it was before the crisis.

According to Kpler data, China’s oil imports decreased by about 5.7 million barrels per day compared to before the crisis, which is equivalent to a similar decrease in global demand, which is a huge amount by all standards. But this does not mean that China’s consumption declined by the same amount, as there is a fundamental difference between demand and consumption: demand includes the quantities destined for inventory, while consumption represents what was actually used. This also does not mean that China’s inventories decreased by the same amount. Here the question arises: How did China compensate for these quantities? Why did some analysts misinterpret its data?

Since the June 2025 war, China has realized that closing the Strait of Hormuz has become a great possibility, and that the party that might do so is not Iran but the United States. Therefore, Beijing adopted a series of preventive policies, the most prominent of which was boosting oil reserves, a process that continued until last May. If China, for example, is adding about 800,000 barrels per day to its stock, then stopping the storage process automatically means a decrease in imports by the same amount, without any decline in the size of the stock.

The stocks in question here are wild stocks. But in the last two months, China has begun unloading Iranian and Russian oil tankers anchored off its ports, known as floating storage, at a rate approaching 1 million barrels per day. This means that China consumed these quantities without affecting its land reserves.

Beijing also imposed a temporary ban on exports of petroleum products. If a refinery exports 200,000 barrels per day, stopping exports forces it to reduce imports of crude oil that produce those quantities, which leads to a decrease in imports without affecting domestic consumption or inventory.

At the same time, multiple signs point to a decline in oil consumption within China. But the reasons for this decline are not settled; It may be the result of the expansion in the use of electric cars and trucks, or the slowdown in economic growth due to trade wars in 2024 and 2025, or a reflection of the Hormuz crisis, or perhaps a combination of these factors. In any case, a decrease in demand means a decrease in imports without affecting inventory.

The factor most absent from the analyzes of many observers is the noticeable increase in China’s oil production. About four years ago, Beijing adopted a policy aimed at boosting domestic production from all energy sources—oil, gas, coal, and renewable energy—purely for security reasons in anticipation of any disruption in supplies due to war or embargo. The government has directed energy companies to increase production regardless of the cost, and has achieved great success, especially in the gas sector. The remainder of the gap was compensated by withdrawing from inventory.

The International Energy Agency decided to withdraw 400 million barrels of strategic stockpiles, including 172 million barrels from US stockpiles, according to the Trump administration’s decision. However, the problem is that these countries were depleting their stocks while China continued to build its stocks, until Beijing’s stocks became approximately double the American stock. In the event of a new crisis, China will be the party most able to control the market, which practically means a transfer of influence from Washington to Beijing. In short, Trump currently has the reins of influence in energy markets, but the continuation of the Hormuz crisis may shift the center of control to China.