The International Energy Agency's latest Oil Market Report reveals a complex landscape for global petroleum markets in 2026, with demand growth accelerating despite persistent supply chain vulnerabilities and geopolitical uncertainties. This authoritative monthly assessment provides critical intelligence for energy stakeholders worldwide.
According to the February 2026 evaluation, worldwide oil consumption is projected to increase by 850,000 barrels per day throughout the year, marking a notable acceleration from the 770,000 barrels per day expansion recorded in 2025. This upward revision signals resilient economic activity in developing nations, even as advanced economies show signs of demand saturation. Significantly, emerging markets outside the OECD will account for the entire growth trajectory, with China maintaining its position as the primary contributor at the country level. The composition of this demand surge has undergone a fundamental shift—petrochemical feedstocks will command over half of the increase, a dramatic change from 2025 when transportation fuels dominated consumption patterns. This evolution reflects the petrochemical sector's critical role in manufacturing everything from plastics to synthetic materials that support modern economies.
The supply narrative presents a more turbulent picture. Global oil production experienced a sharp contraction of 1.2 million barrels per day in January 2026, falling to 106.6 million barrels per day. This substantial decline stemmed from multiple simultaneous disruptions across key producing regions. Severe winter weather paralyzed North American operations, freezing infrastructure and forcing widespread shut-ins across Texas, North Dakota, and Alberta. Simultaneously, Kazakhstan faced export pipeline constraints, while Russia and Venezuela grappled with technical outages and sanctions-related complications. These converging challenges highlight the market's persistent vulnerability to both natural and man-made disruptions.
Looking ahead to full-year 2026, the IEA anticipates production will recover and expand by 2.4 million barrels per day, reaching 108.6 million barrels per day. This growth will be roughly balanced between OPEC+ members and producers outside the alliance, representing a more distributed supply architecture. Non-OPEC+ contributors including the United States, Brazil, Guyana, and Norway are expected to add approximately 1.2 million barrels per day, while OPEC+ nations will contribute a similar volume as they gradually unwind previous production cuts.
Refining sector activity demonstrated typical seasonal adjustment patterns. Crude oil processing volumes retreated from December's record high of 86.3 million barrels per day to 85.7 million barrels per day in January, as maintenance schedules commenced across hemispheres and profit margins compressed. The margin erosion continued into February, reflecting how December's elevated throughput had successfully alleviated product market tightness. For 2026 overall, refinery runs are expected to average 84.6 million barrels per day, representing a 790,000 barrel per day increase from 2025 levels, with non-OECD regions leading this expansion through new capacity additions in Asia and the Middle East.
Inventory data reveals substantial stockbuilding throughout 2025 that has continued into 2026. Global observed inventories swelled by 37 million barrels in December alone, contributing to a massive 477 million barrel accumulation for the entire year—equivalent to 1.3 million barrels per day of oversupply. China's strategic petroleum reserves expanded by 111 million barrels as Beijing took advantage of lower prices to bolster energy security. Meanwhile, oil held in maritime transit surged by 248 million barrels, with sanctioned oil representing 72% of this floating storage, indicating how trade restrictions are reshaping traditional supply chains. OECD commercial stocks defied seasonal trends by rising 3.9 million barrels in December, surpassing their five-year average for the first time since 2021. Early indicators suggest January saw another 49 million barrel increase, further building the global cushion against potential disruptions.
Price action turned decisively bullish in January. The North Sea Dated crude benchmark climbed $10 per barrel over the month, propelled by converging bullish factors. Extreme winter storms in North America created immediate supply concerns, while Kazakh supply interruptions removed substantial volumes from prompt availability. Most significantly, escalating tensions between Iran and the United States raised fears of potential supply disruptions through critical maritime chokepoints. The situation intensified when Washington formally advised vessels to avoid Iranian waters in the Strait of Hormuz, a vital conduit through which 20% of global oil consumption passes daily.
By publication time, Brent futures were trading near $70 per barrel, while Dated Brent hovered around $73 per barrel, with markets remaining highly sensitive to developments in the Persian Gulf region. The price surge occurred despite ongoing diplomatic efforts to de-escalate tensions. Brief reports of negotiation progress in early February temporarily eased prices by a few dollars, but this relief proved short-lived as geopolitical risks resurfaced. Market participants are pricing in significant risk premiums due to the potential for military confrontation that could disrupt oil flows.
OPEC+ policy remains a crucial stabilizing factor amid this volatility. The producer coalition has reaffirmed its commitment to maintaining current production levels, providing some policy clarity amid market turbulence. This decision reflects the group's strategic balancing act: supporting prices to ensure fiscal revenues while avoiding market share erosion to rapidly growing non-OPEC+ supply. The alliance's spare capacity, estimated at 5-6 million barrels per day, serves as a critical buffer that could be deployed if severe supply shortages materialize.
The IEA's analysis underscores several key themes shaping 2026 markets. First, the energy transition is fundamentally reshaping demand patterns, with petrochemicals emerging as a more significant driver than traditional transport fuels. This reflects both the slower-than-expected adoption of electric vehicles in developing markets and the insatiable demand for petrochemical products in manufacturing and construction. Second, supply security concerns persist, with weather-related disruptions and geopolitical tensions exposing the market's continued fragility despite ample inventories. Third, inventory levels have been substantially replenished, providing a meaningful buffer against potential supply shocks that could have caused more extreme price spikes in previous years. Fourth, OPEC+ production discipline will continue playing a crucial role in price formation and market stability.
Looking forward, market participants should monitor several critical variables: the trajectory of Chinese economic recovery and its implications for commodity demand; the resolution of sanctions-related shipping constraints that have created inefficiencies in global trade; the pace of non-OPEC+ supply growth from new projects in the Americas; and the evolution of Middle Eastern geopolitical risks, particularly regarding the Iran nuclear negotiations and regional proxy conflicts. The IEA will continue providing monthly updates as these dynamics unfold, offering essential intelligence for policymakers, investors, and industry stakeholders navigating the evolving global energy landscape.
The report's findings suggest that while fundamental demand remains robust, the oil market's vulnerability to external shocks has not diminished. The combination of adequate inventories, growing non-OPEC+ production, and measured OPEC+ response capacity may help moderate extreme price volatility, but geopolitical flashpoints continue to pose significant upside risks to crude valuations throughout 2026. Energy security concerns are likely to remain at the forefront of policy discussions, particularly in import-dependent regions like Europe and Asia that are watching the Persian Gulf situation with heightened vigilance.