IEA warns global oil deficit deepening as ceasefire collapse disrupts Gulf exports

OPEC crude oil production jumped by approximately 1.7 million barrels per day in July, reaching about 23.6 million bpd, as a brief ceasefire between the United States and Iran allowed Persian Gulf producers to partially restore shipments through the Strait of Hormuz, according to OPEC's latest Monthly Oil Market Report published Wednesday.aa+1

Saudi Arabia led the rebound, reporting to OPEC that it increased crude output by just over 1 million bpd to 8.2 million bpd, up from 7.1 million bpd in June, according to Bloomberg. Iraq posted the largest monthly increase among OPEC members at 665,000 bpd, while Kuwait added 393,000 bpd. Broader OPEC+ output, which includes Russia and other non-OPEC allies, rose by roughly 1.42 million bpd to 37.66 million bpd.worldoil+1

Saudi Recovery Constrained by Export Bottlenecks

Despite the production surge, Saudi Arabia's recovery remains incomplete. The kingdom's output is still several million barrels below pre-conflict levels, and about 780,000 bpd of its July production went into domestic storage rather than to market, as export routes through the Strait of Hormuz and the Red Sea's Bab el-Mandeb Strait remain impeded. The International Energy Agency estimated that Saudi domestic crude stockpiles reached their highest level since at least 2016 by early August.worldoil

The collapse of the ceasefire and renewed U.S.-Iran hostilities have since imperiled those export channels. Middle East oil loadings recovered to 20 million bpd at the start of July but dropped back to 12 million bpd later in the month, according to the IEA.economictimes

Russia Falls Nearly 1 Million bpd Below Quota

In contrast to Gulf producers, Russia's crude output lagged its OPEC+ quota by nearly 1 million barrels a day. Russian companies pumped an average of 8.887 million bpd in July, well below the country's target of 9.824 million bpd, as Ukraine attacked oil infrastructure almost daily. Ukrainian drone strikes have disabled more than 30% of Russia's actual refining capacity, forcing shifts between crude exports and domestic processing throughout the month.bloomberg+1

Deepening Global Supply Deficit

The IEA warned Wednesday that global oil supply will fall by 4.3 million bpd this year, deeper than its previous forecast of 3.7 million bpd, as the renewed Middle East conflict disrupts flows. The agency expects a market deficit of 1.8 million bpd over July through September. OPEC lowered its 2026 demand growth forecast by 200,000 bpd to 580,000 bpd, while the IEA expects demand to contract by 1.6 million bpd this year.aa+1

Middle East production remained 8.3 million bpd below pre-war levels in July, the IEA said, even as the brief ceasefire allowed a partial recovery from the 14 million bpd of lost output seen at the peak of the crisis.economictimes