Energy Outlook Predicts Rising Oil Production, Persistent Export Constraints
The US Energy Information Administration has released its latest Short-Term Energy Outlook (STEO). According to the report, oil production in the Middle East is expected to rise due to increased flows through the Strait of Hormuz and alternative routes out of the region. However, some constraints to exporting oil from the Middle East will persist until 2Q27, keeping crude oil production below pre-conflict averages.
Global oil prices have risen to an average of $91/bbl in August, a $7/bbl increase from July. Prices remain elevated due to falling global oil inventories, which have decreased by 400 million bbl so far this year. The Energy Administration expects inventories to continue falling through the end of 2026, keeping prices near the August monthly average.
The report also forecasts US distillate fuel oil inventories will drop below 100 million bbl in September and remain below the five-year low through much of 2027. Tightness in the global distillate market has raised domestic prices and incentivized US exporters to increase distillate exports.