The International Energy Agency has issued one of its starkest energy market warnings in years, projecting a contraction of approximately 1.5 million barrels per day in global oil demand during the second quarter of 2026, the most severe quarterly decline since the COVID-19 pandemic, as the ongoing conflict involving Iran continues to disrupt supply chains, spike prices, and force consumption cutbacks across the world’s largest energy markets.
In its latest report, the agency revised global oil demand projections sharply downward, now expecting a contraction of approximately 80,000 barrels per day on average across 2026, a downward revision of 730,000 barrels per day compared to its previous forecast. The IEA attributed the deterioration primarily to the Iran conflict, which had upended global energy markets, triggered severe supply shortages, and pushed crude benchmarks to historic highs.
Early and most severe demand destruction had been recorded in the Middle East and Asia Pacific regions, affecting products including naphtha, liquefied petroleum gas, and jet fuel. The IEA warned, however, that the impact was increasingly spreading globally as higher fuel prices and persistent scarcity forced households, businesses, and industries to reduce consumption.
On the supply side, global oil output plunged by 10.1 million barrels per day in March to 97 million barrels per day, driven largely by attacks on energy infrastructure across the Middle East and restrictions on tanker movements through the Strait of Hormuz. OPEC+ production dropped sharply by 9.4 million barrels per day to 42.4 million barrels per day, while non-OPEC+ output fell by 770,000 barrels per day to 54.7 million barrels per day.
The disruption severely affected global refining activity, with 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 approximately 6 million barrels per day in April alone, bringing total throughput down to 77.2 million barrels per day. Middle distillate margins surged to record levels as product scarcity intensified. Physical crude prices surged to approximately $150 per barrel at the peak of the disruption.
The IEA pegged Nigeria’s oil production capacity at approximately 1.42 million barrels per day, noting ongoing constraints despite efforts to increase output, even as Nigeria’s OPEC quota stood at 1.5 million barrels per day.
Against this backdrop, the Dangote Group moved to address one of its most pressing operational challenges by announcing the commencement of crude oil production from its own upstream assets, a development that could significantly ease the feedstock supply difficulties the Dangote Petroleum Refinery had experienced in securing sufficient crude from the Nigerian National Petroleum Company Limited since commencing operations.
Devakumar Edwin, Vice-President of the Dangote Group, confirmed that the company had achieved first oil and commenced testing from its Niger Delta assets, with plans to scale up production significantly in the coming weeks.
“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,” Edwin said.
The Chief Executive Officer of Dangote’s upstream joint venture, West African Exploration and Production, Olajumoke Ajayi, disclosed that the project was producing approximately 4,500 barrels per day from the Kalaekule field on Oil Mining Lease 72, with output expected to increase to approximately 15,000 barrels per day in the near term. Dangote holds a majority stake in the venture, which also holds interests in OML 71 and OML 72 in the shallow waters of the Niger Delta, with the NNPC holding the remaining stake.
Dangote Refinery CEO David Bird said the company was working toward establishing a fully integrated supply chain, combining upstream production with dedicated shipping capabilities to improve crude supply reliability and reduce logistics costs, describing the combination as a potential source of stable and cost-efficient crude for the refinery.
