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Informist, Wednesday, May 13, 2026

 

MUMBAI – The US Energy Information Administration expects Brent crude oil prices to fall to an average of $89 per barrel in Oct-Dec and $79 per bbl in 2027, given a rise in production in West Asia. The administration expects global oil inventories to fall by an average of 8.5 million barrels per day in the June quarter, keeping Brent crude oil prices around $106 per bbl in May and June.

 

The Strait of Hormuz is expected to remain effectively closed through late May, with flows slowly starting to resume in late May or early June, it said. Even after flows resume, the administration believes it will take until late 2026 or early 2027 for most pre-conflict production and trade patterns to resume. "However, we anticipate that some producers around the Persian Gulf will not see their production levels return to pre-conflict levels during the STEO forecast period," the administration said.

 

Iraq, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, and Bahrain are expected to have collectively shut 10.5 million barrels per day of crude oil production in April, assuming the Strait of Hormuz will remain closed until late May, the administration said. The shipping traffic is expected to pick up in June. The administartion said oil shipments through the strait are unlikely to reach pre-conflict levels until later this year.

 

It expects some oil production in West Asia to remain disrupted over that period. This will lead to large oil inventory draws, particularly in May and June, limiting downward pressure on oil prices even after flows through the strait rise. EIA projects global oil inventories to decline by 2.6 million barrels per day this year, compared with a 0.3 million barrels per day decrease in last month's outlook.

 

Disruptions in crude oil production volumes in West Asia have increased since the last forecast by the administration. Now it assesses that production shut-ins averaged 10.5 million barrels per day in April. EIA expects it will peak at nearly 10.8 million barrels per day in May as storage levels reach maximum limits requiring producers to shut in additional volumes. The rise in forecasts is because the administration expects that Iran will have to reduce production in part due to the US blockade, which has limited Iran's ability to export oil.

 

After the departure of the UAE from Organization of the Petroleum Exporting Countries and its allies from May 1, the administration now expects OPEC's spare capacity to average 2.5 million barrels per day in 2027, compared with its previous forecast of 3.8 million barrels per day. This change is because UAE held spare crude oil production capacity.

 

Higher prices are expected to reduce oil demand. The administration expects global oil demand to 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 previous estimates, and 1.2 million barrels per day in its February outlook. "We assume oil demand will rebound next year once supply flows return later in 2026, with oil demand growing by 1.5 million b/d in 2027 to 105.6 million b/d," it said.

 

The administration expects West Texas Intermediate spot average crude oil prices to be $96.42 per bbl in Apr-Jun, $85.68 per bbl by the end of 2026, and $74.39 by 2027. It sees Brent spot average crude oil prices to be $109.73 per bbl in Apr-Jun, $94.85 per bbl by the end of 2026, and $79.39 by 2027.

 

At 1255 IST, the July futures contract of Brent crude oil on the Intercontinental Exchange was $106.68 per barrel, down 1%. The June contract of WTI crude on the New York Mercantile Exchange was down 1.3% at $100.84 per barrel.  End

 

US$1 = INR 95.72

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Simran Rede

Edited by Avishek Dutta

 

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