The U.S. Energy Information Administration raised its oil price forecasts for this year and next year on Wednesday, as global stockpiles fall rapidly under pressure from the loss of Middle Eastern supply in the ongoing Iran war.
Sharply higher oil and fuel prices have been the most visible indicators of the toll on global energy markets from more than six months of the Iran war, in which Tehran has choked oil flows through the Strait of Hormuz and bombed neighboring energy infrastructure in response to U.S. attacks.
Global oil inventories have fallen by about 400 million barrels so far this year and are set to drop further through the end of this year as significant amounts of Middle Eastern output and export volumes are set to remain offline through year end, the EIA said in its Short-Term Energy Outlook.
The agency now expects global benchmark Brent crude oil prices to average about $91 a barrel in the spot market this year, a nearly 5% increase from its prior forecast for 2026. U.S. West Texas Intermediate crude prices are now expected to average $84.65 a barrel this year, the EIA said, also a nearly 5% hike from its prior forecast.
The EIA expects oil flows from the Middle East to rise in the coming months due to gradually increasing Strait of Hormuz shipments and exporters utilizing more workarounds like ship-to-ship transfers, but it cautioned that both Hormuz flows and the workarounds remain beholden to developments in the conflict.
The EIA’s report was finalized on September 3, before the latest escalation of tensions. The U.S. and Iran have traded attacks on shipping and energy infrastructure in the Middle East since the weekend, pushing Brent crude oil prices above $100 a barrel on Wednesday.
Middle East oil output shut-ins rose to 6.7 million barrels per day in August, from 5 million bpd in July, the EIA said.
Attacks on Saudi Arabia’s oil exports through the Bab el-Mandeb and a resulting slump in ship departures from the Yanbu port on the Red Sea contributed to the increase, the EIA said.
Middle East output shut-ins will average about 5.7 million bpd during the fourth quarter, the EIA said, adding that output and exports from the region are not expected to return to pre-conflict levels until the second quarter of next year.
(Reporting by Shariq Khan and Scott DiSavino in New York; Editing by Chizu Nomiyama and Alexander Smith)