KAMCO Invest: Oil demand to grow by 2.16 million barrels in 2027

- Global oil demand fell by 1.6 million barrels during the year

- Kuwait, Saudi Arabia, and Iraq accounted for most of the July production increase

- Saudi Arabia and Kuwait raised their output by 390,000 and 360,000 barrels, respectively

The “Kamlco Invest” report noted that crude oil prices remained above $85 per barrel, amid the continued closure of the Strait of Hormuz and discussions about the possibility of the US government imposing stricter sanctions on Iran and its trading partners. It pointed out that several chief executives of oil companies mentioned that, although actual crude prices in the region remained at reasonable levels, the rise in shipping costs to approximately $20 million adds a price premium borne by buyers. This also means that refined products cannot leave the region, exerting downward pressure on crude oil prices, in contrast to the upward trend in refined product markets.

The report discussed the International Energy Agency’s forecast of a decline in global oil demand by 1.6 million barrels during the year, representing a reduction of 510,000 barrels compared to its previous estimates.

The agency attributed the decline to the closure of trade routes and rising prices, which in turn exert pressure on consumption levels. OPEC also lowered its forecast for oil demand growth during the year to 580,000 barrels per day, marking its fourth consecutive downward revision.

On the supply side, crude production recorded a sharp increase of 1.2 million barrels per day in July 2026, with Kuwait, Saudi Arabia, and Iraq accounting for most of this increase, while Nigeria reduced its output. The United States also recorded marginal production increases for three consecutive weeks.

The report noted that OPEC has once again lowered its forecast for global oil demand growth this year, marking the fourth consecutive monthly revision. The organization now expects demand to rise by 0.58 million barrels per day in 2026, down from its previous projection of 0.78 million, bringing average global demand to 105.7 million barrels per day. It anticipates a decline in demand among OECD member countries of approximately 40,000 barrels per day over the year, while non-OPEC countries are expected to account for nearly all the growth, with an increase of around 0.6 million barrels per day. For 2027, OPEC forecasts oil demand growth of 2.16 million barrels per day, an upward revision from last month’s estimate of 1.94 million, with non-OPEC countries contributing approximately 1.8 million barrels per day to the growth, compared to 0.3 million barrels per day from OPEC members.

In contrast, the International Energy Agency (IEA) presented a much more severe outlook for demand prospects. The agency now expects global oil demand to fall by 1.6 million barrels per day in 2026, representing an additional decline of about 510,000 barrels per day compared to its previous report. The IEA also halved its forecast for the second half of 2026 alone, reducing it by approximately 550,000 barrels per day. It anticipates that the pace of contraction will slow from a quarterly decline of 4.9 million barrels in the second quarter to 2.8 million in the third quarter, before demand turns positive, registering growth of 580,000 barrels in the final quarter of the year. This contrasts with July estimates, which pointed to a contraction of 4.8 million barrels in Q2 2026, followed by a less severe decline of 1.7 million barrels per day in Q3, and growth of 1.2 million barrels in Q4. For 2027, the IEA expects demand to grow by 2.4 million barrels per day, up from 2 million in last month’s estimates. Consequently, the gap between OPEC’s and the IEA’s forecasts for global demand in 2026 has widened to more than 2 million barrels per day.

The report also cited IEA data showing that global supplies rose by 2.4 million barrels per day in July 2026, reaching 101.5 million barrels per day, yet remained 6.3 million barrels per day below levels recorded a year earlier, amid the continued halt of approximately 8.3 million barrels per day of production in the Gulf region.

The report highlighted that Gulf countries’ production increased by an additional 2.5 million barrels per day during the month, reaching 23.9 million barrels per day, but remained 8.3 million barrels per day below pre-war levels. Meanwhile, regional exports, including shipments routed through alternative paths around the Strait of Hormuz, fell sharply by 2.1 million barrels per day to 15 million barrels per day. Oil loading volumes peaked at 20 million barrels per day at the beginning of July before declining to around 12 million barrels per day later in the month. Accordingly, the IEA revised its supply estimates downward once again, cutting its forecast for third-quarter supplies by 1.7 million barrels per day. It expects global supplies to decline by 4.3 million barrels per day in 2026, averaging 102 million barrels per day.

For 2027, the IEA anticipates a supply recovery of 8.3 million barrels per day, reaching 110.3 million barrels per day, compared to July estimates that projected growth of 7.5 million barrels per day.

Regarding OPEC’s crude oil production, the report noted a continued recovery trajectory in July 2026, despite news of supply constraints through the Strait of Hormuz. According to Bloomberg data, OPEC’s average production rose by 1.16 million barrels per day during the month, reaching 19.44 million barrels per day, after most producers in the Gulf region increased their output levels. Among member countries, Iraq recorded the largest production increase, by 460,000 barrels per day, bringing its average output to 2.3 million barrels per day in July 2026. Saudi Arabia and Kuwait also raised their production by 390,000 barrels per day and 360,000 barrels per day, respectively.

Conversely, Nigeria experienced the most significant production decline, falling by 110,000 barrels per day to reach 1.56 million barrels per day in July 2026, due to disruptions at the Erha and Akpo offshore fields, while production levels at other fields remained generally stable. Iran, Venezuela, and Gabon also recorded marginal production declines, while the rest of OPEC’s producers saw limited increases.