Oil demand growth is expected to remain strong for the year, while supply growth will likely remain modest, even as geopolitical risks drive volatility in energy markets.
Despite the ongoing geopolitical uncertainty surrounding the war between the U.S. and Iran, global oil demand is forecast to grow by a healthy pace this year, according to the Organization of the Petroleum Exporting Countries’ (OPEC) monthly oil report for April published on Monday.
That said, the oil cartel expects a temporary dip in the second quarter due to the war in the Middle East.
Demand-Supply Dynamics: The association forecasts demand growth of 1.4 million barrels per day (mb/d) in 2026, unchanged from its forecast issued last month. Much of the demand growth is expected to come from non-Organisation for Economic Co-operation and Development (OECD) countries, mainly China, India and other Asia. The 12-nation group sees demand growth continuing to remain robust at 1.3 mb/d in 2027.
The oil-production group expects demand growth to slow to 0.9 mb/d in the second quarter before improving to 1.6 mb/d each in the third and fourth quarters. It attributed the second-quarter weakness to the ongoing developments in the Middle East but expects it to be compensated in the subsequent two quarters.
Delving into supply, OPEC maintained its supply growth estimate for liquid production by countries not participating in the Declaration of Cooperation (DoC) at 0.4 mb/d. Production growth would come primarily from Brazil, the U.S., Canada and Argentina.
DoC is an alliance between 22 OPEC and non-OPEC producers forged in 2016 to stabilize the global oil market. Natural gas liquids (NGLs) and non-conventional liquids participating in the DoC are estimated to grow by 0.1 mb/d in 2026 to 8.9 mb/d.
That said, the crude oil production by countries participating in the DoC fell by 7.70 mb/d month over month (MoM) in March, averaging 35.06 mb/day compared to 42.72 mb/d in February, OPEC stated, citing secondary sources.
OPEC’s balance of supply and demand equation showed that demand for DoC crude in 2026 remains unchanged from its previous estimate at 42.9 mb/d. This, however, is up 0.6 mb/d from 2025.
Talks Fall Through: Crude prices continue to remain elevated as the fragile ceasefire deal reached between the U.S. and Iran hangs in limbo after the two sides failed to reach an agreement at their meeting in Islamabad over the weekend.
U.S. President Donald Trump threatened to blockade the Strait of Hormuz, a major oil chokepoint in the Persian Gulf through which 20% of the world’s energy shipments flow. Posting on his Truth Social account, the president said, “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.”
Reacting to the U.S. threat, Iran’s Armed Forces Central HQ said it would target ports of other Persian Gulf countries if its ports came under threat, the state-run news agency IRIB stated. “Security in the PersianGulf and the Sea of Oman is either for everyone or for NO ONE. If Iran’s ports are threatened, NO PORT in the region will be safe."
The key sticking points included the U.S. 's demand for the full reopening of Hormuz as part of the deal and the permanent dismantling of Iran’s nuclear enrichment program, and Iran’s demand for war reparations, the lifting of all sanctions against it and the withdrawal of U.S. forces from the region.
Markets React: As the U.S. Navy prepared to implement the blockade of all maritime traffic entering and exiting the Iranian ports from 10 a.m. ET, the West Texas Intermediate (WTI) grade crude oil contract (CL) spiked more than 7% to over $103.50 a barrel. The ICE-traded Brent futures also rallied more than 7% to nearly $102 a barrel.
European benchmark natural gas futures, namely the front-month Dutch TTF futures contract, trading on the ICE jumped about 13% at one point on Monday.
Dutch TTF Natural Gas Futures (Intraday chart)
Source: TradingView
Market Positioning: Managed funds have increased their bullish bets on crude futures contracts. The Commodity Futures Trading Commission’s (CFTC) weekly Commitment of Traders report released Friday showed that the net long position in crude futures climbed near a four-year ahead in the week ended April 7, just before the ceasefire was announced.
Ole Hansen, Saxo’s Head of Commodity Strategy, said this explained the sharp drop in crude prices when the announcement came through, reinforcing the view that last week’s sharp decline was primarily driven by an overcrowded long rather than any meaningful easing in underlying fundamentals.
Market Fundamentals Suffer: “The disruption has reinforced concerns about supply, particularly across middle distillates,” said Hansen. “Tight availability continues to underpin diesel and jet fuel markets, with some European airports warning of potential shortages within three weeks if flows are not restored.”
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