The US Energy Information Administration raised its oil price forecast for this year and next year on Tuesday, as global stockpiles fall rapidly and diesel markets remain tight due to the ongoing Iran war.
Global benchmark Brent crude is now expected to average about $98 a barrel in 2026, up 8% from the EIA’s previous forecast, the agency said in its Short-Term Energy Outlook.
Oil and fuel prices have risen dramatically due to the US-Israeli war on Iran, which in turn has disrupted oil flows through the Strait of Hormuz, which carried about 20% of global oil supplies before the war. Iran has also struck regional energy infrastructure in response to US military strikes.
Falling global inventories and tightening diesel supplies are expected to keep crude prices elevated. Brent is forecast to average about $105 a barrel in the fourth quarter, $14 above the EIA’s previous estimate. US retail diesel prices, which hit record highs last month, are expected to remain above $6 a gallon in October before gradually easing to an average of roughly $4.50 a gallon in 2027.
However, Middle East oil production and exports are expected to gradually recover as transit through the strait improves and producers shift to alternative export routes and ship-to-ship transfers. As flows recover and inventories rebuild, Brent is expected to average $84 a barrel in 2027, the EIA said, $10 above its prior forecast.
Flows have improved as Saudi Arabia restarted shipments through its East-West Pipeline to the Red Sea, which bypasses the Strait of Hormuz, while regional exporters have adapted to attacks on shipping and energy infrastructure by using so-called dark transits, in which tankers disable tracking systems before transferring cargoes at sea.
Those measures have helped restore Gulf oil flows, excluding Iran, to more than 81% of pre-war levels in September.
As those workarounds expand, crude production shut-ins are expected to fall from 4.5 million barrels per day (bpd) in the fourth quarter of 2026 to 2.7 million bpd in the first quarter of 2027, the agency said.
(Reporting by Siddharth Cavale in New York; Editing by David Gaffen)