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Informist, Wednesday, Jul. 8, 2026

 

MUMBAI – The US Energy Information Administration expects Brent crude oil price to average around $74 per barrel in the third quarter of 2026, down by $27 per barrel from the previous month's outlook due to prospects of increasing oil supply and moderating inventory declines. The accumulation of crude oil inventories over the next year is expected to continue putting downward pressure on crude oil prices, and Brent prices are likely to fall to an average of $65 per barrel in 2027, the administration said in its Short-Term Energy Outlook monthly report, July edition.

 

Traffic through the Strait of Hormuz saw a significant uptick as the US and Iran signed a memorandum of understanding to end the conflict and open the strait on Jun. 18. The increase in oil flows through the key waterway has been a primary driver of downward pressure on oil prices in recent weeks. Brent crude oil spot price averaged $85 per barrel in June, $22 per barrel lower than the average in May. Daily Brent crude oil spot prices have since fallen even further, dropping below $70 per barrel on Jul. 1, similar to where prices were when the conflict began in late February.

 

The ability of global oil markets to adjust trade flows and swiftly reduce oil demand exceeded the administration's expectations in earlier forecasts, it said in the report. Most of this demand reduction occurred in Asia, where countries were most reliant on imports of crude oil from West Asia, the report said.

 

Production shut-ins averaged 8.3 million barrels per day in June after peaking at 11.2 million barrels per day in May, the report said. The administration now expects most crude oil production and trade patterns to return to near pre-war levels by the end of 2026, with an average of 1.4 million barrels per day of supply still shut-in in the fourth quarter of 2026. The majority of shut-in crude oil production should be back online in the first quarter of 2027, the report said.

 

Even with the rise in oil production and exports from West Asia in the coming months, it will take time to replenish the considerably reduced global oil inventories and for production in the region to fully recover, the report said. Global oil inventories have likely fallen by 5.1 million barrels per day in Apr-Jun, and will fall by an additional 2.2 million barrels per day in Jul-Sept, the report said. "Inventory draws continue in the third quarter of 2026 because much of the increased tanker traffic is made up of previously stranded oil tankers both inside and outside of the strait," the report said.

 

After this initial adjustment period, which is likely to last for much of Jul-Sept, oil markets are expected to return to pre-war levels of oversupply, the report said. Oil inventories are expected to build by an average of 2.7 million barrels per day in the fourth quarter of 2026 and 5 million barrels per day in 2027. With supply growing faster than consumption, downward pressure is likely to remain on crude oil prices, it said.

 

High fuel prices during the conflict, fuel shortages, and government efforts to curtail fuel use have reduced oil demand in recent months, which has helped limit global oil inventory draws despite the loss of supply, the report said. Global oil consumption is likely to decrease by an average of 1.2 million barrels per day in 2026, with 800,000 barrels per day of this decline coming from non-Organisation for Economic Co-operation and Development countries. However, demand is expected to rebound in 2027 once prices drop and supply flows return fully, with consumption rising by 2 million barrels per day in 2027 to 104.8 million barrels per day, 0.8 million barrels per day above the average in 2025, it said.  End

 

US$1 = INR 95.14

 

Reported by Shreya Shetty

Edited by Akul Nishant Akhoury

 

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