Global oil demand is set to decline in 2026 for the first time since the height of the COVID-19 pandemic, according to a new report from the International Energy Agency. The projected drop of approximately one million barrels per day is attributed to a combination of higher oil prices and persistent supply disruptions stemming from the ongoing conflict between the United States and Iran. While crude oil markets have experienced volatility, the impact on global consumption has been uneven, with significant demand contractions observed in Asia, particularly China.
Despite the broader global slump in oil usage, the United States remains a notable exception. American gasoline consumption increased during the second quarter of 2026, even as pump prices remained significantly higher than pre-war levels. This divergence highlights a tightening in the refined product market, where gasoline and diesel prices have decoupled from the more moderate trends seen in crude oil benchmarks.
Refining margins have reached record levels, with the U.S. 3-2-1 crack spread hitting a record high of $64.58 per barrel on July 8. Industry analysts point to limited global refining capacity and low fuel inventories as the primary drivers keeping prices at the pump elevated. These constraints persist even as crude oil supplies have partially recovered following a fragile ceasefire and subsequent efforts to maintain traffic through the Strait of Hormuz.
Looking ahead, the energy market remains highly sensitive to geopolitical developments. While the International Energy Agency anticipates a smaller decline in demand for the third quarter and a potential return to growth by the end of the year, uncertainty regarding the stability of the Strait of Hormuz and the duration of regional conflicts continues to cloud the outlook for consumers and businesses.