Oil Drifts as IEA Warns of Greater Volatility, OPEC Trims Demand View

CNBC reported Thursday that oil benchmarks were drifting without clear direction as traders processed a downgraded OPEC demand forecast alongside a stark warning from the International Energy Agency about worsening supply conditions.

Brent crude for July slipped roughly 0.2% to around $105.42 a barrel. U.S. West Texas Intermediate for June was off a similar margin near $100.87. Both contracts had opened modestly higher before reversing.

OPEC Trims Its 2026 Demand Forecast

The OPEC cartel lowered its estimate for global demand growth this year to approximately 1.2 million barrels per day, down from a prior projection of 1.4 million bpd. The revision came in the group’s latest monthly oil market report.

The cartel’s own output fell by 1.7 million bpd in April alone. Since the Iran war began in late February, OPEC production has dropped by more than 30%, equivalent to roughly 9.7 million bpd. This month’s report is also notable for another reason. The United Arab Emirates formally left OPEC on May 1, meaning it will no longer appear in future data from the group.

Record Inventory Drain Raises the Stakes

The IEA’s parallel assessment painted an equally sobering picture. The agency noted that supply disruptions stemming from closures at the Strait of Hormuz have now removed more than 14 million bpd from global markets. Total losses from Gulf producers have surpassed one billion barrels.

Global oil inventories are being drawn down at a pace the agency described as unprecedented. With peak summer fuel demand approaching, the IEA cautioned that price swings could intensify in the weeks ahead.

Analysts at ING echoed that view in a research note, pointing out that how long elevated prices persist will depend heavily on geopolitical developments tied to the Hormuz closure and the risk of further damage to energy infrastructure across the region.

Trump-Xi Meeting Adds a Diplomatic Variable

Beyond the supply data, traders are watching diplomatic channels closely. A scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping has drawn particular attention. China is the largest single buyer of oil transiting the Hormuz Strait, giving Beijing significant economic incentive to see the conflict resolved.

Former U.S. Commerce Secretary Carlos Gutierrez told CNBC’s Squawk Box Asia that Xi’s desire for a ceasefire is as strong as Trump’s, framing both leaders as aligned on ending the disruption.

Whether that diplomatic pressure translates into a supply recovery remains the central question hanging over energy markets.

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