Middle East Supply Disruptions: EIA Revises Estimates of Oil Market Impact

The US Energy Information Administration (EIA) has revised its estimates of Middle East supply disruptions, indicating that they will be far worse than previously thought. The revisions are due to the ongoing Iran war and the resulting blockade of the Strait of Hormuz, which is wiping off millions of barrels of global oil supply every day.

The EIA now assumes that the Strait of Hormuz will remain closed through May, up from its earlier assumption of April 30. This has led to an increase in estimated oil production losses, with 10.5 million barrels per day (bpd) shut in across the Middle East in April, rising to a peak of 10.8 million bpd this month.

The EIA's revisions also point to bigger draws from global oil stockpiles, which will lead to elevated oil prices. Brent crude oil prices are expected to average around $106 per barrel in May and June, before declining to $89 a barrel in the fourth quarter of this year as Middle East production starts to recover.