The reason is the war with Iran, which has disrupted production and exports in the Middle East. This was reported on Friday by the International Energy Agency, as cited by CNBC. The last time demand fell was during the height of the COVID-19 pandemic.

The decline is "highly uneven across products and regions": the closure of the Strait of Hormuz has disrupted exports through the Persian Gulf, the report states.

The forecast is based on the assumption of a ceasefire and a gradual resumption of operations at the Strait of Hormuz – an outcome that looks increasingly unlikely amid the exchange of strikes between the US and Iran. Several ships have been attacked, and traffic through the strait has again come to a near standstill. "While the market balance is likely to return to surplus by year-end, the outlook depends on a gradual recovery in tanker traffic through the Gulf. This week's renewed fighting in the Gulf highlights the risks: a lasting peace is essential for oil markets to return to normal," the IEA noted.

There will be no "rapid or linear" recovery; a "highly uncertain and volatile situation" is expected, IEA Oil Director Toril Bosoni said on CNBC.

"But thanks to rising production from other producers and lower demand, we could return to surplus by year-end," he added.

The United States has declared its readiness for "technical talks" with Iran, despite the ongoing airstrikes. Trump has called Iran's attacks on ships "acts of terrorism," and earlier, at the NATO summit in Ankara, he declared the ceasefire "over."