New Delhi, April 14 (NationPress) The International Energy Agency (IEA) has issued a cautionary statement on Tuesday, indicating that the demand for crude oil is anticipated to experience its most significant decline in the second quarter (Q2 2026) since the Covid pandemic severely impacted fuel consumption.

The forecast predicts an 80,000 barrels per day (kb/d) reduction in oil demand this year, primarily due to the ongoing conflict in Iran affecting our global perspective.

This is 730 kb/d less than what was reported last month, and a projected 1.5 mb/d drop in Q2 2026 would mark the steepest fall since the pandemic's onset. The initial declines in oil usage have been observed in the Middle East and Asia Pacific regions, notably affecting naphtha, LPG, and jet fuel. Yet, this demand destruction is expected to proliferate as prices rise and availability decreases,” the agency noted in its findings.

Global crude processing continues to face challenges due to interruptions in feedstock supplies and infrastructure damage, which are constraining global product markets.

In March, oil prices recorded their largest monthly increase ever, following an unprecedented oil supply crisis.

Spot crude indices and differentials surged, surpassing futures markets as refiners hurried to find alternatives to locked-in Middle Eastern shipments, according to the report.

The IEA stated that a brief two-week ceasefire provided a much-needed relief to the global oil markets just as the repercussions of supply disruptions began to resonate worldwide.

“Nevertheless, at this time, it’s uncertain whether the ceasefire will evolve into a sustainable peace and restore regular shipping activities through the Strait of Hormuz,” the report elaborated.

As oil-importing countries rush to secure replacement barrels from a dwindling supply pool, physical crude oil prices have soared to historic highs, nearing $150/bbl, significantly exceeding futures market prices, leading to a growing disconnect.

Even larger increases have been seen in refined products, with middle distillate prices in Singapore hitting record levels above $290/bbl.

The IEA emphasized that restoring flows through the Strait of Hormuz is critical for alleviating pressure on energy supplies, prices, and the global economy.

The latest update on the evolving situation includes the announcement of a US blockade on vessels entering or leaving Iranian ports and coastal regions.

Both consumers and refiners are currently utilizing oil inventories to soften the immediate effects of supply disruptions.

In March, global observed oil stocks decreased by 85 mb, despite increases in both on-land and offshore inventories in the Middle East and further accumulation in China.

The most significant drop occurred in oil on water, following a near cessation of operations from Gulf producers reliant on the Strait. Crude oil stocks in Asian importing countries fell by 31 mb, with further reductions anticipated in April.

“The likelihood of a lasting negotiated solution to the ongoing conflict remains uncertain at this point. We provide a forecast that presumes a return to regular oil and gas deliveries from the Middle East to global markets by mid-year, although not to pre-conflict levels,” the report stated.