EIA Raises Oil Price Forecasts Amid U.S.-Iran Conflict and Declining Inventories

The U.S. Energy Information Administration (EIA) has raised its oil price forecasts again, citing declining global inventories and ongoing tensions between the U.S. and Iran. The agency now expects Brent crude to average around $105 per barrel in the fourth quarter of this year, a $14 increase from its previous forecast. By 2027, prices are projected to fall to $84 per barrel, though this is still $10 higher than earlier estimates.

The EIA attributes the upward pressure on oil prices to the U.S.-Iran conflict, which has disrupted oil shipments through the Strait of Hormuz, a critical route for global oil supplies. Since the conflict began on February 28, oil prices have surged by over 37%. The EIA also notes that global oil inventories are depleting rapidly, making the market more vulnerable to price fluctuations.

Chevron CEO Mike Wirth highlighted the loss of buffer inventories, stating that this has made the oil market more vulnerable and raised the floor for oil prices. The EIA's report also projects that U.S. crude oil production will reach a record 14.3 million barrels per day by 2027, up from 13.9 million barrels per day in 2026. Meanwhile, U.S. oil demand is expected to decline slightly to 20.6 million barrels per day in 2026 before rebounding to 20.8 million barrels per day in 2027.

Despite the challenges, the EIA anticipates that Middle Eastern oil production and exports will gradually recover as shipping conditions in the Strait of Hormuz improve. Saudi Arabia has resumed oil shipments via its East, West pipeline, and efforts by Middle Eastern exporters to counteract attacks on shipping and energy infrastructure have helped Gulf-region oil exports rebound to more than 81% of pre-war levels.