PARIS — The International Energy Agency cut its second-quarter global oil demand forecast by 460,000 barrels a day in its monthly oil market report released Wednesday morning, the largest single-month downward revision since the 2024 Chinese property slowdown, and trimmed its full-year 2026 demand growth estimate to 980,000 barrels a day from 1.18 million previously.

The agency, headquartered in Paris and traditionally the most closely watched of the three major monthly demand forecasters, cited softer-than-expected Chinese refinery runs through April, an unwinding of strategic stockpile buying across Europe as Gulf supply normalized, and a weaker-than-expected post-war rebound in marine bunker fuel demand. The cut brings the agency’s forecast meaningfully closer to the more cautious numbers published earlier in the week by the U.S. Energy Information Administration.

Brent crude, which had traded near $88.45 in the European morning before the report’s publication, slipped 80 cents to $87.65 within five minutes of the release and stabilized in a $0.30 band through the rest of the European session. West Texas Intermediate traded at $83.75, while the Brent-Dubai spread narrowed by 12 cents to its tightest level since March, reflecting easing concerns about Middle Eastern supply.

“The agency has finally acknowledged what the cargo data has been saying for six weeks,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note to clients. “Chinese teapot runs are well below where they were running last year, the European thermal complex is leaking switching demand back to gas, and the bunker market never delivered the wartime restocking we and most of the sell side built into the rebound case.”

The report’s most significant revision came in its Chinese demand line. The agency lowered its 2026 Chinese oil demand estimate by 380,000 barrels a day, citing run cuts at independent refiners in Shandong province, weaker diesel consumption in the construction sector, and a faster-than-expected substitution of liquefied natural gas trucks into the long-haul freight fleet. The agency revised its 2026 Chinese demand growth estimate to 110,000 barrels a day, from 320,000 previously, the lowest growth figure for the country in the agency’s published history.

European demand was revised down by 80,000 barrels a day for the second quarter, with the report noting that gas-to-oil switching at industrial sites — which had supported diesel and fuel oil consumption during the late-March supply shock — was reversing now that LNG inventories had normalized and the TTF gas benchmark had traded back below €28 per megawatt-hour. United States demand was left essentially unchanged.

The supply side of the balance saw less dramatic revision. The agency raised its 2026 non-OPEC liquids supply estimate by 90,000 barrels a day, with upward revisions to U.S. shale output and to production from Guyana and Brazil partially offset by faster-than-expected decline rates at Norwegian offshore fields. OPEC+ production was assumed to remain at current levels through the June ministerial meeting in Vienna.

The combination of weaker demand and slightly stronger supply pushed the agency’s implied global inventory build for the second quarter to 1.6 million barrels a day, from 600,000 previously. A senior agency official, briefing reporters in Paris, characterized the revision as “a meaningful structural adjustment” rather than “a one-month surprise,” and indicated that further softening was possible if Chinese second-quarter macroeconomic data confirmed the picture emerging from refinery-run reports.

The revision is expected to weigh on the calculus heading into the OPEC+ ministerial meeting on June 1. Saudi delegates and several Gulf colleagues have argued in recent days that the roughly 1.5 million barrels a day added to the market during the April 1 emergency session — to cool the wartime price spike — should remain on the market through at least the third quarter. Russia and Kazakhstan, by contrast, have pushed quietly for a partial rollback of those additions, citing softer-than-expected price recovery.

“The IEA report makes the case for a Saudi-style status quo at Vienna,” said Petra Lindqvist, head of energy research at Sundstrand Commodities in Stockholm. “If you believe the demand picture is structurally softer than the spring rebound case, then pulling barrels off the market into the back half of the year is the move. If you do not believe it, you cut. The bigger surprise would be a meaningful Saudi concession to the Russians.”

Saudi Aramco shares fell 1.4 percent on the Tadawul on Wednesday following the report’s publication, the steepest single-day decline since the late-April price stabilization. Exxon Mobil and Chevron each fell roughly half a percent in U.S. pre-market trading. BP and Shell, more sensitive to crude price movements, fell 1.1 percent and 0.9 percent respectively in London.

Several refining stocks traded higher on the report. Valero, Marathon Petroleum and Phillips 66 each gained between 0.7 percent and 1.4 percent in U.S. pre-market trade, as analysts noted that softer crude prices typically benefit downstream margins in the U.S. system, particularly in the Gulf Coast where heavier sour crudes have remained well-supplied since the post-war normalization of Middle East flows.

Outside the oil complex, the report registered immediately in adjacent markets. Brent forward curves shifted back into a deeper contango at the front of the structure, with the M1-M2 spread settling at minus 18 cents from minus 6 cents on Tuesday, a configuration that typically encourages storage rather than near-term drawdown. The European TTF gas benchmark held its ground.

The agency’s chief economist, in remarks delivered at a Paris briefing after the report’s release, said the agency would continue to monitor the trajectory of Chinese demand “with particular attention” and acknowledged that “if the May refinery-run data confirms what April showed, we may be in a structurally different demand environment than the one we were forecasting six weeks ago.”

OPEC’s own monthly market report, traditionally published a day after the IEA’s, is scheduled for release Thursday morning. The cartel’s secretariat has historically taken a more optimistic view of demand than the Paris agency, and several analysts expect Thursday’s report to maintain a higher demand growth number while acknowledging some softening in the Chinese picture.

The U.S. Energy Information Administration is scheduled to release its weekly inventory report later Wednesday, with the consensus expectation of a 1.7 million barrel crude build.