Global oil markets could face a major supply shock in 2026, with output projected to drop sharply in the second quarter.
This is according to a new report titled “Commodity Market Outlook – April 2026” by the World Bank.
The report warns that oil supply could fall by as much as 7 million barrels per day (mb/d) during the period, marking the steepest quarterly decline since the COVID-19 pandemic.
The projected drop is largely linked to geopolitical tensions and disruptions in key oil-producing regions.
This development raises fresh concerns about global energy stability, as tightening supply conditions could trigger price volatility and broader economic ripple effects.
What the report is saying
The World Bank report shows that global oil supply is expected to decline by 1.5 mb/d, or 1.4 percent, over the full year in 2026, with the most severe contraction occurring in the second quarter.
- “In 2026Q2 alone, supply is projected to drop by almost 7 mb/d (6.6 percent; y/y), to 98.4 mb/d, the biggest quarterly fall since the COVID-19 pandemic,” the World Bank stated.
- The oil market is expected to record a deficit of roughly 3.7 mb/d during the quarter, the largest on record, according to the International Energy Agency.
- Disruptions linked to the Strait of Hormuz, which handles a significant share of global oil shipments, are a major factor behind the supply squeeze.
- Production among the OPEC+ group is forecast to decline by nearly 5% in 2026.
Despite the projected downturn, global oil output is expected to recover later in the year if geopolitical tensions ease.
Context
The anticipated supply disruption comes amid ongoing instability in global oil markets, particularly in regions critical to energy exports.
- The Strait of Hormuz remains a key chokepoint, accounting for a large share of global oil and gas flows, making it highly sensitive to geopolitical tensions.
- Recent data shows OPEC production dropped by 27.5% to 20.79 million barrels per day in March 2026—one of the steepest declines in decades.
- Non-OPEC producers, especially the United States, are expected to partially offset supply losses by increasing output by about 0.5 mb/d.
- Nigeria’s crude production has shown signs of recovery, rising to 1.84 million barrels per day in March, though challenges such as oil theft and infrastructure constraints persist.
The report also notes that while OPEC+ has attempted to stabilise the market by adjusting production quotas, earlier shutdowns and operational disruptions continue to weigh heavily on supply.
What you should know
On March 2, OPEC and its allies agreed to raise oil production by 206,000 bpd starting in April to stabilize global markets.
Crude prices spiked above $100 per barrel on March 9 amid conflicts involving the United States, Israel, and Iran, before retreating to $87 per barrel the following day.
- Government revenue performance is closely tied to production volumes and global oil prices.
- Sustained output growth could strengthen external reserves and reduce fiscal strain.
- The Federal Government adopted a 2.6 million bpd oil production benchmark for 2026, but will use a more conservative 1.8 million bpd for budgeting.
