Global oil demand falls as US drivers keep buying more gas

Regular gasoline hit $4.55 a gallon on May 7, even as American drivers kept filling up.

Oil demand will drop by 1.1 million barrels a day year over year in 2026, its first annual decline since 2020, a downgrade of 700,000 barrels a day from the May outlook in the International Energy Agency’s June 2026 Oil Market Report. Second-quarter deliveries plunged by 5 million barrels a day from a year earlier as higher fuel prices and supply disruptions hit some regions harder than others. In the IEA’s July report, the decline is projected to ease through the year, with annual contractions narrowing from 4.8 million barrels a day in the second quarter to 1.7 million in the third, before a 1.2 million-barrel-a-day rise in the fourth.

Supply has also shifted back. Global oil output rebounded by 4.1 million barrels a day to 98.8 million barrels a day in June as shipments through the Strait of Hormuz resumed and Gulf production partially recovered. Refined product cracks and refinery margins reached four-year highs in early July, while global refinery runs rose by 1.5 million barrels a day in June, though they were still 6 million barrels a day below the level of a year earlier.

The U.S. Energy Information Administration forecasts gasoline prices to average just under $3.80 a gallon in the third quarter, down from more than $4.20 in the second quarter, with consumption in the second half of 2026 running below the five-year average and slipping below the five-year low in some months. Gasoline use rose in the second quarter.

Oil demand rose by only 0.65 million barrels a day in 2025, far below the 1.4 million-barrel annual average from 2010 to 2019. Ships loaded with crude were stranded in the Persian Gulf for more than three months during the U.S.-Iran war. The IEA expects demand growth to rebound by 2 million barrels a day in 2027.