The United States Energy Information Administration (EIA) has released its latest oil price forecasts. In the May short term energy outlook (STEO) released last week, the EIA sees the Brent spot price averaging $94.85 per barrel in 2026 and $79.39 per barrel in 2027.
This marks a slight decline from its previous 2026 average Brent spot price forecast of $96.00, and an increase from its previous 2027 average Brent spot price forecast of $76.09 per barrel, both of which were made in the EIA’s April STEO.
A quarterly breakdown included in the EIA’s latest STEO projected that the Brent spot price will come in at $109.73 per barrel in the second quarter of this year, $99.09 per barrel in the third quarter, $89.00 per barrel in the fourth quarter, $83.95 per barrel in the first quarter of next year, $81.00 per barrel in the second quarter, $78.00 per barrel in the third quarter, and $75.00 per barrel in the fourth quarter.
In its previous April STEO, the EIA saw the Brent spot price coming in at $114.60 per barrel in the second quarter of 2026, $99.80 per barrel in the third quarter, $88.00 per barrel in the fourth quarter, $81.90 per barrel in the first quarter of 2027, $78.00 per barrel in the second quarter, $75.02 per barrel in the third quarter, and $69.94 per barrel in the fourth quarter.
“Global oil markets are in a period of heightened volatility and uncertainty due to the de facto closure of the Strait of Hormuz, a major world oil transit chokepoint through which nearly 20 percent of global oil supply flowed prior to military action that began on February 28,” the EIA said in its latest STEO. “The strait has been effectively closed to shipping traffic since.
The Brent crude oil spot price averaged $117 per barrel in April, $46 per barrel higher than the average in February,” the EIA highlighted. “This monthly average price is also the highest since June 2022, following Russia’s invasion of Ukraine.
Daily Brent spot prices reached as high as $138 per barrel on April 7. The closure of the strait has dramatically reduced the availability of oil supplies to global markets and has had cascading effects across oil supply chains,” it warned. The EIA went on to point out that daily Brent spot prices “increased significantly” in April, “reflecting the tightness and demand for physical barrels of crude oil for delivery in the very near term”.
“At the same time, front-month Brent futures prices for delivery in June were highly volatile due to significant uncertainty around the length of the disruption,” the EIA said. “Fewer physical barrels available for near-term delivery helped widen the differential between spot and front-month futures to nearly $30 per barrel early in April, as buyers bid to replace disrupted supplies,” it added.
“Although crude oil prices remained elevated in late April, the two prices trended closer as trade flows adjusted and refiners sourced new supplies,” it continued. In its latest STEO, the EIA noted that, since the U.S.-Iran conflict began in late February, “crude oil implied volatility has averaged 78 percent, based on futures and options contract data from the CME Group, with daily Brent crude oil implied volatility reaching as high as 106 percent on March 12.
“Prior to the conflict, implied volatility was generally less than 30 percent since the beginning of 2024,” the EIA said, noting that recent Brent crude oil implied volatility “is the highest it has been since the onset of the Covid-19 pandemic in early 2020”.
The EIA highlighted in the report that it has adjusted its expectations around the duration of the disruption. “We now assume that the Strait of Hormuz will remain effectively closed through late May, with flows slowly starting to resume in late May or early June,” it revealed.
“Even after flows resume, we expect it will take until late 2026 or early 2027 for most preconflict production and trade patterns to resume,” it added. “However, we anticipate that some producers around the Persian Gulf will not see their production levels return to preconflict levels during the STEO forecast period,” it continued.
The EIA stated in its May STEO that disrupted crude oil production volumes in the Middle East have increased since its last forecast. “We assess that production shut-ins averaged 10.5 million barrels per day in April, and we expect they will peak at nearly 10.8 million barrels per day in May as storage levels reach maximum limits requiring producers to shut in additional volume.
“One of the factors driving our increased expectations of shut-in production is that we now forecast Iran will have to reduce production in part due to the U.S. blockade, which has curtailed Iran’s ability to export oil. “Our initial assessment after the closure of the strait was that, as a result of months of global oversupply and significant global oil inventory builds in on-land and floating storage, the market was well positioned to weather a short-term disruption to oil flows,” the report said.
It added that “as the conflict and disruption have persisted, oil inventories have continued to fall. It takes several months for higher oil prices to lead to supply growth for priceresponsive producers like shale oil production in the United States, and even longer in other regions.” The EIA noted in its STEO, however, that oil demand “responds much more quickly to high prices.”
“We expect higher prices will bring about a reduction in oil demand, which will help move the oil market towards balance. “The longer that shut in production volumes and disruptions to oil flows persist the larger we expect this price response to be.
As a result, we have reduced our expectations around global oil demand growth, based on reports of government initiatives to reduce fuel use, fuel shortages, and the curtailing of refined oil product exports. “We assume reductions in demand occur primarily in Asia, which is more reliant on crude oil supplies from the Middle East.
As a result, we now assume that global oil demand will increase by an average of 0.2 million barrels per day in 2026, down from an average of 0.6 million barrels per day in last month’s STEO, and 1.2 million barrels per day in our February STEO. “We assume oil demand will rebound next year once supply flows return later in 2026, with oil demand growing by 1.5 million barrels per day in 2027 to 105.6 million barrels per day,” it revealed.
The EIA highlighted in its STEO that, although the U.S. announced a ceasefire in early April, the EIA still assesses that oil prices “will reflect a larger risk premium throughout the forecast. “Traffic through the Strait of Hormuz has largely been at a standstill, both because of the risk of attacks on oil tankers as well as a new U.S. blockade against Iranian oil shipments through the strait,” it pointed out.
In the report, the EIA estimated that global oil inventories will fall by an average of 8.5 million barrels per day in 2Q26, “pushing Brent crude oil prices to an average of around $106 per barrel in May and June”. “Once the traffic through the Strait of Hormuz gradually begins to resume in June and shut-in oil production gradually returns, we assume oil prices will begin to fall, decreasing to an average of $89 per barrel by 4Q26 as global oil inventory withdrawals lessen,” the EIA said.
“We assess that most shut in oil production will be fully restored by January 2027 and that global oil inventories will again start building, helping oil prices gradually lower to an average of $79 per barrel in 2027,” it projected.
The EIA highlighted in its report that this month’s STEO assumes that the strait reopens in late May. It revealed that it assessed the impact on oil prices if there was a delay in the reopening of the strait by one month – through late June.
This would result in crude oil prices that are more than $20 per barrel higher than the EIA’s current forecast in the near term, the EIA noted. “Prices would remain higher than our current forecast through next year, although the difference would narrow over time,” it said.
The EIA also highlighted that its forecast includes the U.S. Strategic Petroleum Reserve release announced on March 11 and the collective release of strategic stocks announced by the International Energy Agency. In a statement sent to Rigzone this week, Enverus Intelligence Research (EIR) revealed that it was maintaining its “higher for longer” oil outlook.
