EIA significantly raises oil price forecast: Brent crude oil average price expected to reach $91 in 2026, supply disruptions exceed expectations.

On September 9, the U.S. Energy Information Administration (EIA) released its latest Short-Term Energy Outlook (STEO), significantly raising its Brent crude oil price forecasts for the next two years.

The EIA projects that the average Brent crude oil spot price will be $91 per barrel in 2026 and $74 per barrel in 2027, an upward revision of $4 and $5 respectively from previous forecasts. Meanwhile, the EIA projects the average Brent price for the second half of this year to be around $90 per barrel, $8 higher than its August forecast.

The core reason for this adjustment is that the disruption to Middle Eastern oil supplies has lasted longer than previously expected.

The EIA projects that some Middle Eastern oil production will remain shut down in the coming months due to shipping restrictions in the Strait of Hormuz and the Bab el-Mandeb Strait. Middle Eastern oil production cuts averaged 6.7 million barrels per day in August, up from 5 million barrels per day in July; the EIA projects that average production cuts will remain at approximately 5.7 million barrels per day in the fourth quarter.

Meanwhile, global oil inventories are declining rapidly. The EIA estimates that global oil inventories have decreased by approximately 400 million barrels so far this year and expects them to continue declining for the remainder of 2026. Given the time required for supply recovery, the EIA anticipates that Brent crude oil prices will remain around $90 per barrel in the second half of this year.

Brent crude oil rose more than 3% on Wednesday, briefly breaking through $100 a barrel and rising above $101 for the first time since July.

The recovery of Middle Eastern supply remains key to the decline in oil prices.

The EIA's baseline scenario does not assume that oil prices will remain high in the long term. The agency expects Brent prices to gradually decline in 2027 as Middle Eastern oil exports gradually recover, shut-down production capacity restarts, and global inventories re-accumulate, with an annual average price of $74 per barrel, further decreasing to around $67 per barrel in the second half of 2027.

However, the EIA also pointed out that there is still considerable uncertainty regarding oil flows through the Strait of Hormuz and alternative shipping routes, which means that actual oil price movements may be more volatile than the baseline forecast.

It's worth noting that the EIA's forecast model this month used data up to September 3rd, and did not incorporate market changes that occurred afterward. This means that the EIA's full-year forecast of $91 may still be lower than the short-term risk premium currently being traded in the market.

Reuters reports that oil shipments through the Strait of Hormuz have fallen from approximately 8 to 9 million barrels per day before the conflict to less than 2 million barrels per day, further fueling market concerns about the duration of supply disruptions.

Oil prices break through $100, inflation risks rise again.

Rising oil prices are once again becoming a significant variable in global inflation and monetary policy. Analysts point out that if Brent crude oil prices remain above $100 per barrel, energy costs could be further passed on to transportation, manufacturing, and consumer spending, increasing inflationary pressures and potentially leading major central banks to maintain higher interest rates for an extended period.

Meanwhile, the buffer in the global oil market is narrowing. The U.S. Strategic Petroleum Reserve is currently only about 290 million barrels, near its lowest level since 1982; and months of supply disruptions in the Middle East have led to declines in inventories in some major consuming countries.

Therefore, the core signal released by the EIA's upward revision of its forecast is not that "oil prices will remain above $100 for a long time," but that the supply shock in the Middle East is forcing the market to reassess the oil price center for the next one to two years.

If shipping through the Strait of Hormuz resumes and production capacity gradually restarts as expected by the EIA, oil prices may still fall in 2027; however, if supply disruptions expand further, the current forecasts of $91 and $74 may still be revised upwards.

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