Morning Highlights: Brent Holds at $108 as IEA Declares Global Supply Deficit for 2026; 14 Million bpd Shut In, Q2 Gap at 6 Million bpd, Trump Says He Does Not Need China's Help

Wednesday, May 13, 2026

Brent (July) $108.07 | WTI (June) $102.17 Brent +0.30 (+0.3%), WTI flat.

Both benchmarks holding above $100 for the tenth consecutive week. U.S. crude stocks fell for a fourth straight week per API data. IEA declares 2026 global oil supply deficit of 1.78 million bpd, Q2 deficit at 6 million bpd; 14 million bpd shut in, over 1 billion barrels lost; Trump says he does not need China's help to end the war; U.S. April CPI posts largest annual increase in nearly three years; Trump-Xi summit begins Thursday.

Bottom Line

The IEA's monthly report is out and it certainly deserves a look. The agency that in December projected a nearly 4 million bpd global surplus for 2026 is now projecting a 1.78 million bpd deficit for the full year. The Q2 deficit alone is 6 million bpd. More than 14 million bpd is shut in. Global inventories drew 246 million barrels in March and April combined. And critically, the IEA's base case - a gradual resumption of Hormuz traffic from Q3 onwards - still leaves the market severely undersupplied through end of Q3 even assuming the conflict ends by early June. That is the optimistic scenario. The IEA is not describing a crisis that ends with a peace deal. It is describing a supply hole so deep that the market remains structurally short through the summer regardless of the diplomatic outcome, with only a modest Q4 surplus possible if everything goes right.

Trump saying Tuesday he does not think he needs China's help to end the war - on the eve of a summit where China's leverage with Tehran was supposed to be the central energy agenda item -- is either a negotiating posture or a genuine signal that the diplomatic track is being abandoned in favor of military or economic pressure. Either way, it reduces the probability of the summit producing a concrete deliverable on Hormuz. The sanctions on Chinese entities facilitating Iranian oil shipments, announced just before the summit, reinforce the pressure-over-partnership framing.

The U.S. CPI data showing the largest annual inflation increase in nearly three years is the domestic economic consequence of the war becoming visible in official data. The Federal Reserve holding rates in response to war-driven inflation while the economy absorbs higher fuel costs is the stagflationary scenario that central bankers have been most worried about since February 28. Higher rates plus higher fuel costs plus supply uncertainty is a combination that eventually destroys demand –

but the IEA's demand forecast revision to a 420,000 bpd decline for 2026, up from an 80,000 bpd drop previously, suggests that demand destruction is already being incorporated into official forecasts and will accelerate as summer product shortages materialize.

Eurasia Group's observation that supply losses already exceeding 1 billion barrels means oil prices are likely to remain above $80 per barrel for the rest of the year is the floor assessment that matters most for your clients' planning purposes. Even in a resolution scenario, $80 is the base. The IEA's Q4 modest surplus scenario requires Hormuz to begin reopening in Q3, Gulf production to restore progressively, and the vessel backlog to clear -- a sequence that takes months and can be disrupted at any point by renewed hostilities, mine incidents or infrastructure damage that has yet to be assessed.

Top Developments

IEA: 2026 Supply Deficit of 1.78 Million bpd, Q2 Gap at 6 Million bpd, Worst Crisis in History

The IEA's May oil market report declared that global oil supply will not meet total demand in 2026, projecting a full-year deficit of 1.78 million bpd -- a swing of more than 5.7 million bpd from December's near-4 million bpd surplus forecast. The Q2 2026 deficit is 6 million bpd. More than 14 million bpd is currently shut in, cumulative supply losses exceed 1 billion barrels, and the 246 million barrel inventory drawdown in March and April alone represents the fastest depletion on record. The IEA said the market will remain severely undersupplied through end of Q3 even assuming the conflict ends by early June, with its base case projecting gradual Hormuz traffic resumption from Q3 and only a modest Q4 surplus. The coordinated 400 million barrel strategic reserve release has seen 164 million barrels delivered to date. Overall 2026 global supply is now forecast to fall 3.9 million bpd versus a prior forecast of 1.5 million bpd. Demand is now forecast to fall 420,000 bpd versus a prior estimate of 80,000 bpd as price-driven demand destruction and slower economic growth take hold.

Trump Says He Does Not Need China's Help, Summit Begins Thursday

Trump said Tuesday he did not think he would need China's help to end the war with Iran, undermining the central premise of the Beijing summit's energy agenda. The statement came as Iran tightened its grip on the Strait of Hormuz and Tehran continued to reject the MOU framework. Trump-Xi discussions begin Thursday and Friday, with Iran, Hormuz and trade on the agenda. Washington imposed sanctions on nine companies and three individuals for facilitating Iranian oil shipments to China immediately before the summit, framing the meeting as pressure-driven rather than partnership-oriented. A deal linking resumed Chinese purchases of U.S. oil and LNG - halted by tariffs on roughly $8.4 billion in 2024 flows -- with Chinese diplomatic engagement on Tehran is the most economically logical summit outcome but requires Chinese willingness to pressure Iran that has not been demonstrated throughout the conflict.

Russia April Output Down 460,000 bpd Year on Year Per IEA

The IEA reported Russian crude oil production declined 460,000 bpd in April from a year earlier to approximately 8.8 million bpd as Ukrainian drone attacks on energy infrastructure continued to take a cumulative toll. The figure reflects both direct infrastructure damage at Baltic and Black Sea terminals and the broader degradation of Russian export capacity that has been building since Ukraine intensified its energy campaign in March. Russian barrels remain a critical alternative supply source for India and other Asian buyers, making continued Ukrainian pressure on export infrastructure directly consequential for the global markets that are relying on Russian supply to partially offset lost Gulf volumes.

U.S. CPI Posts Largest Annual Increase in Nearly Three Years, Fed on Hold

U.S. consumer prices rose sharply in April for a second consecutive month, producing the largest annual inflation increase in nearly three years as higher fuel costs work through the economy. The Federal Reserve is expected to hold interest rates steady in response, with elevated rates potentially dampening oil demand over coming months. U.S. crude inventories fell for a fourth consecutive week per API data, with distillate stocks also declining, as strong export flows continue to pull supply away from domestic markets. EIA official inventory data is due later Wednesday. Eurasia Group said the scale of supply losses already exceeding 1 billion barrels means oil prices are likely to remain above $80 per barrel for the rest of 2026 regardless of the conflict's resolution timeline.