OPEC Cuts 2026 Demand Forecast Again, but Oil Hits One-Month High on Strait of Hormuz Conflict

The Organization of the Petroleum Exporting Countries (OPEC) cut its 2026 global oil demand growth forecast again in its July 13 monthly report, the second straight reduction.^[Reuters] At the same time, a report from the International Energy Agency (IEA) said 2026 global oil demand is expected to post its first annual decline since the 2020 pandemic peak, falling by roughly 1 million barrels per day.^[Fortune] Yet against this weakening demand backdrop, U.S.-Iran military clashes in the Strait of Hormuz escalated sharply on July 14, pushing both WTI and Brent crude to their highest levels in a month.^[Reuters] As of the morning of July 14, 2026, Eastern Time, WTI crude was at $75.45, up 5.66% from the prior day, and Brent crude was at $80.36, up 5.72%. With U.S. equity markets closed for the holiday, energy giant ExxonMobil (XOM) last traded at its July 13 close of $144.51, up 4.05% from the prior close of $138.88, after hitting an intraday high of $145.23.

Demand Weakness Signals Mount: OPEC and IEA Both Cut Forecasts

OPEC's July report cut its 2026 global oil demand growth forecast, though Reuters did not provide a specific figure, noting it was the second consecutive reduction.^[Reuters] The move follows the IEA's bearish assessment. Citing the IEA report, Fortune said global oil demand will post an annual decline in 2026 of roughly 1 million bpd, the first since the 2020 pandemic shock.^[Fortune]

The data reveals the depth of the weakness. In May 2026, global oil demand averaged just 97.9 million bpd, down a sharp 5.3 million bpd year-over-year.^[Fortune] The demand drop was concentrated in Asia, particularly China. The report showed Chinese oil demand fell by 1.5 million bpd in May, a 9% decline, the largest of any country.^[Fortune] The IEA report attributed the decline to high oil prices and physical supply disruptions that have hit the world hard and unevenly.^[Fortune]

Strait of Hormuz Clashes Escalate, Oil Prices Surge

In stark contrast to the weak demand picture, supply-side geopolitical risk has flared. According to a Reuters report on July 14, the U.S. and Iran stepped up attacks on each other in the Strait of Hormuz, further escalating tensions in the region.^[Reuters] The Strait of Hormuz is one of the world's most critical oil transit chokepoints, and its security is directly tied to the stability of global crude supply.

As a result, international oil prices jumped sharply on July 14. WTI crude futures rose 5.66% to $75.45 a barrel, and Brent crude futures rose 5.72% to $80.36 a barrel, both hitting their highest closes in a month.^[Reuters] Earlier, Fortune reported that supply disruptions from the U.S.-Iran war had left oil-laden tankers stranded in the Persian Gulf for over three months, unable to safely transit the Strait of Hormuz.^[Fortune] Jim Burkhard, Vice President and Head of Crude Oil Research at S&P Global Energy, commented: "The future of the Strait of Hormuz may be more uncertain than when the war began." He argued that Iran is still trying to control the strait and the U.S. has not fully restored normal passage, making a return to pre-war conditions highly unlikely.^[Fortune]

Refined Product Prices Stay High, Inflation Fears Emerge

Although crude prices had fallen under the weight of weak demand, consumers have not felt relief at the pump. Fortune noted that the drop in global oil demand and crude prices has not effectively passed through to refined products; gasoline, diesel, and other refined product prices remain elevated.^[Fortune] In the U.S., despite gasoline prices being about 50% above pre-war levels in May, gasoline usage actually increased in the second quarter.^[Fortune]

This has stoked concerns about the inflation outlook. In a CNBC video report on July 13, Argus chief economist David Fyfe said strategic oil reserves can only offer temporary relief.^[CNBC] He argued that supply risks, potential changes in Chinese demand, and rising energy prices could all fuel inflation and complicate central bank policy.^[CNBC] Meanwhile, Eni's CEO warned on July 11 that the oil market risks breaking out of its current price range by early 2027.^[Reuters]

Chinese Demand a Key Variable, Market Outlook Diverges

On the demand side, China's role is a key focus for the market. Fortune's report specifically noted that China sharply reduced its oil purchases on the global market during the spring, a move seen as a key factor preventing oil prices from spiking even further.^[Fortune] As the world's largest crude importer, changes in Chinese demand have an outsized impact on the global oil market. The 1.5 million bpd, 9% demand drop in May clearly signals the dampening effect of an economic slowdown or energy transition on oil consumption.

U.S. oil demand, however, tells a different story. The IEA report showed that despite high oil prices, U.S. gasoline usage actually increased in the second quarter, making it a major exception to the global demand decline.^[Fortune] This demand divergence, combined with the ongoing geopolitical risk in the Strait of Hormuz, makes the outlook for oil prices highly uncertain. On one hand, OPEC and IEA data point to weak demand; on the other, supply disruption risks and structural tightness in the refined products market are providing support for prices.

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