New Delhi: Global oil supply saw an unprecedented collapse in March, setting off a chain reaction across energy markets as the US-Israel and Iran war choked Gulf flows, drained inventories and hit demand, according to the International Energy Agency’s latest Oil Market Report (April 2026) released Tuesday.
Compared to the previous month, global oil supply fell by 10.1 mb/d (million barrels per day) in March to 97 mb/d, marking what the IEA describes as the largest disruption on record.
The report stated that output from OPEC+ countries bore the brunt of the decline, dropping by 9.4 mb/d month-on-month to 42.4 mb/d. Whereas, the production by non-OPEC+ members also slipped by 770 kb/d (thousand barrels per day) to 54.7 mb/d, as reduced output from Qatar offset gains from countries like Brazil and the United States.
OPEC+ is an alliance of the 12 Organization of the Petroleum Exporting Countries (OPEC) members including Saudi Arabia, Russia, Iraq, the UAE, and Iran, among others.
This marks a sharp reversal from the IEA’s earlier expectations. The agency now expects demand to fall by an average of 80 kb/d in 2026, instead of growing by 730 kb/d as projected in last month’s report, highlighting how quickly the crisis has reshaped consumption patterns.
The disruption is primarily caused by the standstill of flows through the Strait of Hormuz, a key route for global oil trade. Shipments through the strait dropped to just 3.8 mb/d in early April, down from over 20 mb/d in February before the crisis.
Alternative routes have helped to some extent, with oil transiting these routes rising to 7.2 mb/d from less than 4 mb/d. However, they have not been enough to make up for the shortfall.
“Exports through alternative routes—most notably from the west coast of Saudi Arabia and Fujairah on the east coast of the UAE, as well as the ITP pipeline that runs from Iraq to Ceyhan in Turkey—had increased to 7.2 mb/d from less than 4 mb/d before the war,” IEA stated.
It noted that “the overall loss in oil exports exceeds 13 mb/d,” with the situation worsened by production cuts and damage to energy infrastructure in the region. As a result, total supply losses crossed 360 million barrels in March, with a loss of another 440 million barrels expected in April.
The supply shock has also pushed prices sharply higher. Oil prices saw their biggest-ever monthly rise in March, with spot markets reacting more strongly than futures. At the time of the report, North Sea dated crude was trading at around $130 per barrel, about $60 higher than pre-conflict levels, showing the level of stress in the market.
To cope with the disruption, consumers and refiners have been turning to oil reserves, which too are falling quickly.
According to IEA, global oil stocks fell by 85 million barrels in March, even as storage levels rose in the Middle East and China. The biggest drop was seen in oil stored at sea, as tanker movements from Gulf producers slowed sharply.
Asian countries that rely heavily on imports have been hit hard. Crude stocks in the region fell by 31 million barrels in March, and are expected to drop further in April.
“Where oil inventories could not bridge the gap, demand has taken a hit. Most notably, Asian petrochemical producers have curtailed operating rates as feedstock supply dried up,” the IEA report stated.
It added, “Households and businesses using LPG have also been impacted, while flight cancellations across the Middle East, parts of Asia and Europe have led to a sharp drop in jet fuel consumption.”
Reflecting these pressures, global oil demand has also weakened sharply. The agency estimates that demand fell by 800,000 barrels per day (kb/d) year-on-year in March and is expected to drop further by 2.3 mb/d in April.
(Edited by Amrtansh Arora)
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