EIA Raises Oil Price Forecasts Amid Iran War Disruptions
The US Energy Information Administration (EIA) has revised its oil price forecasts upward for 2024 and 2025, citing declining global stockpiles and sustained market tightness due to the ongoing Iran war. The agency now expects the global benchmark Brent crude to average $98 a barrel in 2026, an 8% increase from its previous estimate. The conflict has disrupted oil flows through the Strait of Hormuz, a critical chokepoint that previously handled about 20% of global oil supplies. Iran's retaliatory strikes on regional energy infrastructure have further exacerbated supply constraints.
The EIA predicts Brent crude will average $105 a barrel in the fourth quarter of 2024, $14 higher than its prior forecast. US retail diesel prices, which reached record highs last month, are expected to remain above $6 a gallon in October before gradually easing to an average of $4.50 a gallon in 2027. The agency attributes the price surge to falling global inventories and tight diesel supplies, which are likely to keep crude prices elevated in the near term.
However, the outlook for Middle East oil production and exports is cautiously optimistic. As transit through the Strait of Hormuz improves and producers adopt alternative export routes, oil flows are expected to recover. Saudi Arabia has resumed shipments through its East-West Pipeline to the Red Sea, bypassing the strait, while regional exporters have adapted to attacks by using 'dark transits', tankers disabling tracking systems before transferring cargoes at sea. These measures have helped restore Gulf oil flows, excluding Iran, to over 81% of pre-war levels in September.
Crude production shut-ins are projected to decrease from 4.5 million barrels per day in the fourth quarter of 2024 to 2.7 million barrels per day in the first quarter of 2027. As flows recover and inventories rebuild, Brent is expected to average $84 a barrel in 2027, $10 above the EIA’s previous forecast.