Global oil squeeze: 4.8 mbpd deficit to trigger demand drop, support OMCs

A widening global crude oil supply deficit of nearly 4.8 million barrels per day (mbpd) could trigger demand destruction and improve margins for oil marketing companies (OMCs), according to a report by PL Capital.

The report highlights that ongoing geopolitical tensions in West Asia have significantly disrupted global oil supply chains, pushing prices higher and increasing market volatility. A major factor behind the tightening supply is the disruption of crude flows through the Strait of Hormuz, leading to an estimated supply loss of nearly 15 mbpd.

However, part of this disruption has been mitigated by coordinated strategic reserve releases of around 400 million barrels by the International Energy Agency (IEA), along with alternative export routes bypassing Hormuz, contributing approximately 6.2 mbpd.

Despite these efforts, a supply-demand gap of about 4.8 mbpd persists in the global market. According to the report, this imbalance is likely to be addressed through demand destruction, as elevated crude prices begin to weigh on global consumption patterns.

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Early signs of this trend are already visible. The IEA projects global oil demand to contract by around 1.5 mbpd in the second quarter of 2026, with a sharper drop of approximately 2.3 mbpd recorded in April.

The anticipated demand slowdown could help partially rebalance market dynamics, potentially exerting downward pressure on crude prices while improving refining and marketing margins for OMCs.