Global oil prices declined on Thursday after leading energy agencies cut their forecasts for oil demand in 2026, citing weaker consumption prospects amid disruptions caused by the ongoing U.S.-Israeli conflict with Iran.
Brent crude futures, the international benchmark, fell by more than $1 per barrel, dropping 1.5 per cent to around $87.69 a barrel in early trading. U.S. West Texas Intermediate (WTI) crude also declined by about 1.6 per cent to $81.97 a barrel, reversing part of the gains recorded in recent sessions.
The decline followed the release of updated market outlooks from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), both of which lowered expectations for global oil demand next year.
OPEC revised its forecast for global oil demand growth in 2026 to 580,000 barrels per day, while the IEA projected an even steeper decline in consumption, estimating demand could contract by 1.6 million barrels per day. The agencies attributed the weaker outlook to higher fuel prices, supply disruptions and economic uncertainty stemming from the conflict involving Iran.
Oil prices also came under pressure after new data from the U.S. Energy Information Administration (EIA) showed an unexpected surge in American crude oil inventories. Commercial crude stockpiles rose by 17.4 million barrels during the week ending August 7, reaching 424.4 million barrels—the largest weekly increase since January 2023 and far exceeding analysts’ expectations of a drawdown. The increase was largely attributed to weaker exports, reinforcing concerns about slowing global demand.
Despite the decline, prices remained supported by continued geopolitical tensions in the Middle East. Talks between the United States and Iran aimed at advancing an agreement to ease the conflict remained deadlocked, while disruptions to shipping through the Strait of Hormuz continued to raise concerns over global crude supplies.
Shipping data indicated that vessel traffic through the strategically important waterway remained below normal levels, highlighting the continuing risks facing one of the world’s busiest oil transit routes. Analysts said uncertainty surrounding supply prevented a sharper fall in prices even as demand expectations weakened.
The market is currently balancing two competing forces: weaker demand projections, which are weighing on prices, and ongoing supply risks linked to geopolitical instability. While slower consumption has increased expectations of softer oil prices, continued disruptions affecting Middle Eastern exports and Black Sea shipping routes have kept traders cautious.
The movement in global crude prices is closely watched by governments, fuel importers and consumers because it influences the cost of refined petroleum products. In Kenya, changes in international oil prices are one of the factors considered by the Energy and Petroleum Regulatory Authority (EPRA) when reviewing monthly fuel prices, alongside exchange rate movements, freight charges and applicable taxes.
With geopolitical tensions showing little sign of easing and demand forecasts continuing to evolve, analysts expect oil markets to remain volatile in the coming weeks as traders monitor developments in the Middle East, global inventory levels and the broader economic outlook.