IEA Forecasts 1.5m Bpd Oil Demand Cut in Q2, Pegs Nigeria’s Capacity at 1.42m Bpd – THISDAYLIVE

• Dangote to begin crude production amid supply shortages from NNPC

Emmanuel Addeh in Abuja

Global oil demand is set for a sharp contraction in the second quarter of 2026, with the International Energy Agency (IEA) projecting a decline of about 1.5 million barrels per day, the steepest drop since the Covid-19 pandemic disrupted fuel consumption worldwide.

In its latest report, the agency said global oil demand is now expected to contract by about 80,000 barrels per day on average in 2026, representing a sharp downward revision of 730,000 bpd compared to its previous forecast.

The IEA attributed the decline primarily to the ongoing conflict involving Iran, which has upended global energy markets, triggered supply shortages, and pushed prices sharply higher. Early demand destruction has been most evident in the Middle East and Asia Pacific regions, particularly affecting products such as naphtha, liquefied petroleum gas (LPG), and jet fuel.

However, the agency warned that the impact is likely to spread globally as higher fuel prices and persistent scarcity force households, businesses, and industries to cut back on consumption.

On the supply side, the report highlighted an unprecedented disruption, with global oil output plunging by 10.1 million bpd in March to 97 million bpd. The decline was largely driven by continued attacks on energy infrastructure in the Middle East and restrictions on tanker movements through the Strait of Hormuz, the report said.

Production among OPEC+ countries dropped sharply by 9.4 million bpd month-on-month to 42.4 million bpd, while non-OPEC+ output fell by 770,000 bpd to 54.7 million bpd, as declines in some regions offset gains in countries such as Brazil and the United States.

The disruption has also affected refining activity, with global crude processing volumes falling significantly due to limited feedstock availability and infrastructure damage. Refineries in the Middle East and Asia were forced to cut runs by about 6 million bpd in April, bringing total throughput down to 77.2 million bpd.

The IEA now expects global refinery runs to decline by an average of 1 million bpd in 2026, tightening product markets and pushing refining margins higher. Middle distillate margins, in particular, have surged to record levels.

Oil inventories have also come under pressure, with global observed stocks falling by 85 million barrels in March. Stocks outside the Middle East Gulf recorded the steepest drawdown, as restricted flows through the Strait of Hormuz disrupted supply chains.

At the same time, crude accumulation has increased within the Middle East due to limited export routes, while China has continued to build strategic reserves, adding about 40 million barrels during the period.

The tightening supply-demand balance has driven oil prices sharply higher, with spot crude benchmarks recording their largest-ever monthly gains in March. Physical crude prices surged to about $150 per barrel at the peak of the disruption, significantly above futures market levels, reflecting acute shortages in available cargoes.

The IEA warned that a prolonged disruption could lead to sustained volatility in oil markets, forcing countries to rely more heavily on inventories and implement demand management measures to cushion the impact of rising prices.

Besides, the IEA pegged Nigeria’s oil production capacity at about 1.42 million bpd, reflecting ongoing constraints in output despite efforts to boost production levels, despite the 1.5 million bpd quota by OPEC.

Meanwhile, the Dangote Group is set to commence crude oil production from its upstream assets, a move that could help ease supply challenges faced by the Dangote refinery.

Vice-President of the group, Devakumar Edwin, told Platts, part of S&P Global, that the company has already achieved first oil and commenced testing from its Niger Delta assets, with plans to scale up production in the coming weeks.

Testing activities are currently underway and are expected to be completed within a short timeframe, after which the company will begin pumping crude in larger volumes and proceed with drilling additional wells.

“We have opened a well and begun standard testing, which should be completed in the next three to four weeks maximum. After that point, oil can start to be pumped in larger volumes, and the company can begin work on drilling new wells,” he stated.

The Chief Executive Officer of Dangote’s upstream joint venture, West African Exploration and Production (WAEP), Olajumoke Ajayi, said the project is currently producing about 4,500 bpd from the Kalaekule field located on Oil Mining Lease (OML) 72.

She noted that output is expected to increase to about 15,000 bpd in the near term, marking a significant step in the company’s upstream expansion strategy.

Dangote holds a majority stake in the upstream venture, which also has interests in OML 71 and 72, located in the shallow waters of the Niger Delta. The assets are operated by First E&P, while the Nigerian National Petroleum Company Limited (NNPC) holds the remaining stake.

The development is expected to strengthen crude supply to the Dangote refinery, which has faced challenges in securing sufficient feedstock from the NNPC since commencing operations.

The Chief Executive Officer of the Dangote refinery, David Bird, said the company is working towards establishing a more integrated supply chain, including upstream production and shipping capabilities, to improve reliability and reduce costs.

He explained that indigenous production, combined with dedicated logistics infrastructure, could provide a more stable and efficient crude supply for the refinery.

“Alongside its upstream interests, the company is seeking to establish its own shipping presence to help reduce logistics costs and improve the reliability of its crude sourcing. Combined with WAEP’s indigenous production, Dangote-owned vessels could offer the refinery a fully integrated and attractive source of stable crude supply,” Platts quoted Bird as saying.

The move comes amid ongoing concerns over crude supply allocations, with the NNPC recently indicating plans to increase cargo deliveries to the refinery in the coming months.

To some extent the integration of upstream production into the Dangote Group’s operations could help mitigate supply risks, enhance operational efficiency, and support Nigeria’s broader energy security objectives.