EIA forecasts high oil prices in the first half of 2026
The US Energy Information Administration (EIA) expects the Brent crude spot price to average $105/bbl in June and July 2026, before declining to around $79/bbl the following year.
IMAGE: An oil pumpjack. Getty Images
The EIA forecasts Brent crude’s price to stay elevated this year amid the ongoing Middle East conflict that has turmoiled global markets and sharply reduced vessel movement through the Strait of Hormuz.
“Global oil markets remain in a period of heightened volatility and uncertainty as the de-facto closure of the Strait of Hormuz, a major world oil transit chokepoint, has now surpassed three months,” the EIA said.
The energy agency emphasised that its price forecast remains highly sensitive to the projected duration of the conflict between the US, Israel and Iran, and the subsequent impact on oil production.
The EIA expects the Strait of Hormuz to remain effectively closed in the first half of this year, with flows slowly starting to resume in the third quarter of 2026.
“If flows resume within this timeframe, we expect it will take until early 2027 for production and trade patterns to generally return to pre-conflict status,” the energy agency said in its June short-term energy outlook (STEO) report.
Supply and demand estimates
Global liquid fuels production is expected to reach 99 million b/d in 2026 – about 2.6 million b/d lower than the EIA’s previous estimate.
Production shut-ins are expected to increase to nearly 11.3 million b/d in June, as storage levels reach maximum limits requiring producers to shut in additional volumes.
The US agency expects production shut-ins to “rise through 2Q26 [second quarter of 2026] as storage levels, particularly in Iran, reach maximum limits, requiring producers to shut in additional volumes as the closure of the strait persists.”
In 2027, total liquid fuels production is projected to touch 109.3 million b/d – 200,000 b/d lower than the EIA’s May estimates. The US agency expects most production shut-ins to be restored by January 2027 and oil inventories to restart building.
OPEC liquid fuels production is expected to average around 23.1 million b/d this year – about 2.1 million b/d lower than the EIA’s previous projection. The Saudi Arabia-led coalition is expected to increase production to 29.3 million b/d in 2027, the US-based agency said.
The reduction in OPEC’s production estimates comes as the UAE – a core-OPEC member – announced its departure from the coalition in April.
The US energy agency forecasts global oil demand to decrease by an average of 1.1 million b/d to 102.9 million b/d in 2026 – about 1.2 million b/d lower than its previous forecast.
“We have reduced our expectations around global oil demand growth, based on reports of government initiatives to reduce fuel use, fuel shortages,” the EIA said.
The decline in oil demand will primarily occur in Asia as it is more reliant on crude supplies from the war-torn Middle East region, the EIA said.
Oil demand growth is expected to rebound in 2027 – growing by an average of 2.5 million b/d to around 105.3 million b/d, as oil flows are expected to resume in the latter half of this year.
By Aparupa Mazumder
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