EIA forecasts lower oil prices in 2027
The US Energy Information Administration (EIA) expects the Brent crude spot price to average $74/bbl in the third quarter of 2026 before easing to around $65/bbl in 2027.
IMAGE: Crude oil pump jacks in colour. Getty Images
“Expectations of increasing oil supply and moderating inventory draws have caused oil prices to fall,” the EIA said.
Brent averaged $85/bbl in June, down $22/bbl from May and $32/bbl below its recent peak in April 2026.
The agency expects global oil inventories to build over the next year, a trend it believes will continue to weigh on crude prices.
However, Brent has moved higher on the day after Iran reportedly attacked three commercial vessels near the Strait of Hormuz on Tuesday, prompting US military retaliation and escalating regional tensions.
Supporting prices further, the US Department of the Treasury (DoT) revoked a sanctions waiver that had temporarily allowed transactions involving Iranian-origin crude oil and petrochemical products following the renewed attacks in and around the Strait of Hormuz.
Supply and demand estimates
The EIA expects global oil inventory draws to slow to 2.2 million b/d in the third quarter of 2026, compared with its previous forecast of more than 7 million b/d for June and 5 million b/d in the second quarter of 2026.
“More oil production and the reestablishment of trade flows will result in less oil being taken out of inventory in the coming months than we previously forecast,” the agency said.
With oil flows resuming, the EIA now expects fewer disruptions to Middle East crude production than it projected previously.
Production shut-ins averaged 8.3 million b/d in June after peaking at 11.2 million b/d in May. The agency expects most crude production and trade flows to return to near pre-conflict levels by the end of this year. It forecasts an average of 1.4 million b/d of production will remain shut-in during the fourth quarter of 2026, with most of the offline volumes returning in the first quarter of 2027.
Although Middle East oil production and exports are expected to increase in the coming months, the EIA said it will take time to rebuild significantly depleted global inventories and for regional production to fully recover.
The agency estimates that global oil inventories declined by an average of 5.1 million b/d in the second quarter of 2026 and will fall by a further 2.2 million b/d in the third quarter.
“We forecast oil inventories will build by an average of 2.7 million b/d in 4Q26 and 5 million b/d in 2027. As supply grows faster than consumption, we expect downward pressure on oil prices for the remainder of our STEO forecast,” the EIA said.
The agency added that restocking strategic and commercial reserves will help soften the expected decline in oil prices.
Elevated fuel prices during the conflict, fuel shortages and government measures to curb fuel consumption have weakened oil demand in recent months, helping limit global inventory draws despite supply losses, according to the EIA.
Although timely demand data remain limited, particularly for Asian countries most affected by the closure of the Strait of Hormuz, indicators from organisations including the IEA, foreign governments and other sources suggest that liquid fuel consumption has declined significantly.
The EIA expects global oil demand to contract by an average of 1.2 million b/d in 2026, with 0.8 million b/d of the decline coming from non-OECD countries.
However, it expects demand to recover next year as prices ease and supply flows normalise. Global oil consumption is forecast to increase by 2.0 million b/d in 2027 to 104.8 million b/d, which would be 0.8 million b/d higher than the average recorded in 2025.
By Tuhin Roy
Please get in touch with comments or additional info to news@engine.online
