The U.S. Power Info Administration (EIA) revealed its newest oil worth forecasts in its Might quick time period vitality outlook (STEO), which was launched on Might 12.
In accordance with this STEO, the EIA now sees the Brent spot worth averaging $94.85 per barrel in 2026 and $79.39 per barrel in 2027. This marks a slight decline from its earlier 2026 common Brent spot worth forecast of $96.00, and a rise from its earlier 2027 common Brent spot worth forecast of $76.09 per barrel, each of which had been made within the EIA’s April STEO.
A quarterly breakdown included within the EIA’s newest STEO projected that the Brent spot worth will are available in at $109.73 per barrel within the second quarter of this yr, $99.09 per barrel within the third quarter, $89.00 per barrel within the fourth quarter, $83.95 per barrel within the first quarter of subsequent yr, $81.00 per barrel within the second quarter, $78.00 per barrel within the third quarter, and $75.00 per barrel within the fourth quarter.
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In its earlier April STEO, the EIA noticed the Brent spot worth coming in at $114.60 per barrel within the second quarter of 2026, $99.80 per barrel within the third quarter, $88.00 per barrel within the fourth quarter, $81.90 per barrel within the first quarter of 2027, $78.00 per barrel within the second quarter, $75.02 per barrel within the third quarter, and $69.94 per barrel within the fourth quarter.
“International oil markets are in a interval of heightened volatility and uncertainty because of the de facto closure of the Strait of Hormuz, a significant world oil transit chokepoint via which practically 20 p.c of world oil provide flowed previous to navy motion that started on February 28,” the EIA stated in its newest STEO.
“The strait has been successfully closed to transport site visitors since. The Brent crude oil spot worth averaged $117 per barrel in April, $46 per barrel larger than the typical in February,” the EIA highlighted.
“This month-to-month common worth can also be the very best since June 2022, following Russia’s invasion of Ukraine. Day by day Brent spot costs reached as excessive as $138 per barrel on April 7. The closure of the strait has dramatically diminished the supply of oil provides to international markets and has had cascading results throughout oil provide chains,” it warned.
The EIA went on to level out that each day Brent spot costs “elevated considerably” in April, “reflecting the tightness and demand for bodily barrels of crude oil for supply within the very close to time period”.
“On the identical time, front-month Brent futures costs for supply in June had been extremely unstable on account of important uncertainty across the size of the disruption,” the EIA stated.
“Fewer bodily barrels out there for near-term supply helped widen the differential between spot and front-month futures to just about $30 per barrel early in April, as patrons bid to interchange disrupted provides,” it added.
“Though crude oil costs remained elevated in late April, the 2 costs trended nearer as commerce flows adjusted and refiners sourced new provides,” it continued.
In its newest STEO, the EIA famous that, because the U.S.-Iran battle started in late February, “crude oil implied volatility has averaged 78 p.c, based mostly on futures and choices contract knowledge from the CME Group, with each day Brent crude oil implied volatility reaching as excessive as 106 p.c on March 12”.
“Previous to the battle, implied volatility was typically lower than 30 p.c because the starting of 2024,” the EIA stated, noting that current Brent crude oil implied volatility “is the very best it has been because the onset of the Covid-19 pandemic in early 2020”.
The EIA highlighted within the report that it has adjusted its expectations across the length of the disruption.
“We now assume that the Strait of Hormuz will stay successfully closed via late Might, with flows slowly beginning to resume in late Might or early June,” it revealed.
“Even after flows resume, we anticipate it is going to take till late 2026 or early 2027 for many pre-conflict manufacturing and commerce patterns to renew,” it added.
“Nonetheless, we anticipate that some producers across the Persian Gulf is not going to see their manufacturing ranges return to pre-conflict ranges throughout the STEO forecast interval,” it continued.
The EIA said in its Might STEO that disrupted crude oil manufacturing volumes within the Center East have elevated since its final forecast.
“We assess that manufacturing shut-ins averaged 10.5 million barrels per day in April, and we anticipate they are going to peak at practically 10.8 million barrels per day in Might as storage ranges attain most limits requiring producers to close in further volumes,” it warned.
“One of many components driving our elevated expectations of shut-in manufacturing is that we now forecast Iran must cut back manufacturing partially because of the U.S. blockade, which has curtailed Iran’s potential to export oil,” it added.
“Our preliminary evaluation after the closure of the strait was that, on account of months of world oversupply and important international oil stock builds in on-land and floating storage, the market was properly positioned to climate a short-term disruption to grease flows,” it stated.
“Because the battle and disruption have persevered, oil inventories have continued to fall. It takes a number of months for larger oil costs to result in provide progress for price-responsive producers like shale oil manufacturing in the USA, and even longer in different areas,” it continued.
The EIA famous in its STEO, nevertheless, that oil demand “responds rather more shortly to excessive costs”.
“We anticipate larger costs will deliver a couple of discount in oil demand, which can assist transfer the oil market in direction of stability,” it revealed.
“The longer that shut-in manufacturing volumes and disruptions to grease flows persist the bigger we anticipate this worth response to be. In consequence, now we have diminished our expectations round international oil demand progress, based mostly on experiences of presidency initiatives to scale back gas use, gas shortages, and the curbing of refined oil product exports,” it added.
“We assume reductions in demand happen primarily in Asia, which is extra reliant on crude oil provides from the Center East. In consequence, we now assume that international oil demand will enhance by a median of 0.2 million barrels per day in 2026, down from a median of 0.6 million barrels per day in final month’s STEO, and 1.2 million barrels per day in our February STEO,” it stated.
“We assume oil demand will rebound subsequent yr as soon as provide flows return later in 2026, with oil demand rising by 1.5 million barrels per day in 2027 to 105.6 million barrels per day,” it famous.
The EIA highlighted in its STEO that, though the U.S. introduced a ceasefire in early April, the EIA nonetheless assesses that oil costs “will replicate a bigger threat premium all through the forecast”.
“Visitors via the Strait of Hormuz has largely been at a standstill, each due to the chance of assaults on oil tankers in addition to a brand new U.S. blockade in opposition to Iranian oil shipments via the strait,” it identified.
Within the report, the EIA estimated that international oil inventories will fall by a median of 8.5 million barrels per day in 2Q26, “pushing Brent crude oil costs to a median of round $106 per barrel in Might and June”.
“As soon as the site visitors via the Strait of Hormuz steadily begins to renew in June and shut-in oil manufacturing steadily returns, we assume oil costs will start to fall, reducing to a median of $89 per barrel by 4Q26 as international oil stock withdrawals reduce,” the EIA stated.
“We assess that almost all shut-in oil manufacturing will likely be totally restored by January 2027 and that international oil inventories will once more begin constructing, serving to oil costs steadily decrease to a median of $79 per barrel in 2027,” it projected.
The EIA highlighted in its report that this month’s STEO assumes that the strait reopens in late Might. It revealed that it assessed the affect on oil costs if there was a delay within the reopening of the strait by one month – via late June. This might end in crude oil costs which can be greater than $20 per barrel larger than the EIA’s present forecast within the close to time period, the EIA famous.
“Costs would stay larger than our present forecast via subsequent yr, though the distinction would chop over time,” it stated.
The EIA additionally highlighted that its forecast consists of the U.S. Strategic Petroleum Reserve launch introduced on March 11 and the collective launch of strategic shares introduced by the Worldwide Power Company.
In a press release despatched to Rigzone this week, Enverus Intelligence Analysis (EIR) revealed that it was sustaining its “larger for longer” oil outlook.
EIR highlighted on this assertion that it was protecting its common Brent forecast of $95 per barrel for the remainder of 2026 and $100 per barrel for all of 2027. The corporate identified within the assertion that it has retained this forecast since March 11.
EIR famous that its outlook was pushed by the closure of the Strait of Hormuz impacting oil flows and subsequent low OECD crude and product inventory ranges. It identified that its base case assumes a 3 month Strait of Hormuz closure and warned that every further month of disruption provides round $10-15 per barrel to its outlook.
“Since March 11, our view has been that oil costs would stay larger for longer, and now we have not deviated from that place as occasions have unfolded,” EIR Director of Analysis Al Salazar stated within the assertion.
“Nonetheless, our three month base case closure presumption is about to return due, and the shortage of decision introduces further uncertainty across the path ahead,” he added.
“For each further month the Strait stays closed, we’d anticipate $10-$15 per barrel to be added to our worth outlook,” Salazar continued.
In a Customary Chartered report despatched to Rigzone this week, Customary Chartered Financial institution Power Analysis Head Emily Ashford outlined that, as a part of the corporate’s “core view”, it expects crude oil costs “to stay headline pushed, taking path from escalation and de-escalation within the U.S.-Iran battle within the close to time period, earlier than slowly adjusting to a brand new regular when the battle ends, $10-20 per barrel larger than pre-conflict ranges, ending the yr round $80 per barrel”.
“Medium to long run costs needs to be supported by buying for strategic reserves, a deal with useful resource nationalism and hoarding, and the logistical lags attributable to the disruption,” Ashford added within the report.
“Constrained transit via the Strait of Hormuz has pressured Gulf producers to shut-in manufacturing. Tight spare capability, and reliance on sure transit routes have been highlighted,” Ashford continued.
The Customary Chartered Financial institution analyst went on to level out that Brent crude remained in “sturdy backwardation alongside the ahead curve, with the again steady at $70 per barrel”.
To contact the writer, e-mail andreas.exarheas@rigzone.com
