IEA cuts 2025-26 supply outlook by 2.4 million bpd as Hormuz closure depletes stocks

Global observed oil inventories fell by 246 million barrels across March and April, the fastest rate of depletion on record, according to the IEA's latest monthly oil market report. That draw has consumed the surplus that existed before US and Israeli strikes on Iran at the end of February, and Birol confirmed at the G7 that commercial stocks are now measured in weeks, not months.

The coordinated strategic reserve release, the largest in IEA history, has added 2.5 million barrels per day to supply. The 32-member agency agreed in March to withdraw 400 million barrels to stabilise markets; by 08 May, approximately 164 million barrels had been released. Birol was explicit that strategic reserves 'are not endless', and the agency has revised its 2025-26 supply outlook to a net loss of 3.9 million barrels per day (bpd), up from a prior forecast of 1.5 million bpd, on the assumption that the conflict continues.

What the IEA warning means for UK energy buyers

Brent over the past six months provides the price backdrop against which the IEA's revised supply shortfall must be read.

Oil feeds directly into UK gas and power forward curves through LNG shipping economics, gas-to-oil price linkage in some legacy contracts, and carbon costs embedded in generation dispatch. A tightening physical oil market, particularly one where Birol identifies 'a perception gap between physical and financial markets', typically precedes a catch-up move in financial prices. Buyers with renewals due in the next one to three months should treat current forward levels as subject to upward revision if physical draws continue at the March-April pace.

Key figures and decision points to monitor:

• Strategic reserve drawdown: 164 million barrels released of 400 million barrels committed by 08 May
• Global supply shortfall revised to 3.9 million bpd through 2026, from 1.5 million bpd previously
• Northern hemisphere summer demand (diesel, jet fuel, gasoline) set to accelerate inventory depletion from June
• Strait of Hormuz closure duration: any reopening signal would be the single largest downside risk to the current price trajectory
• IEA next monthly oil market report: the updated inventory stock-change figures will confirm whether the March-April draw rate has moderated

Birol's 'perception gap' remark is worth noting. If financial oil markets have not yet priced the full physical tightness he describes, a repricing event in Brent would feed through to UK Season-1 and Season-2 gas and power contracts within days.

Watch the next IEA monthly report for revised stock-change data and any update to the 3.9 million bpd supply-loss projection; that figure, more than any single day's price move, will shape how UK forward curves reprice through the summer buying window.