The U.S. Energy Information Administration raised its forecast for U.S. oil production next year, expecting global oil output to continue exceeding demand after the resumption of navigation in the Strait of Hormuz.

The U.S. Energy Information Administration raised its forecast for U.S. oil production next year, expecting global oil output to continue exceeding demand after the resumption of navigation in the Strait of Hormuz.

Due to supply disruptions in major oil-producing countries in the Middle East causing a recent sharp rise in oil prices, the US has raised its forecast for future domestic oil production. According to the Short-Term Energy Outlook released by the US Energy Information Administration (EIA) on Tuesday, US crude oil production is expected to increase by 220,000 barrels per day in 2027 to 13.83 million barrels per day, up from a previous estimate of 13.32 million barrels per day. EIA expects production in 2026 to be 13.61 million barrels per day, previously forecast at 13.60 million barrels per day.

This latest EIA forecast for 2027 is about 500,000 barrels per day higher than the agency's estimate in February this year. Previous reports showed that US oil production would peak this year and begin to decline in 2027.

In its latest report, the EIA stated: “Because changes in oil prices take time to affect production—from investment decisions, rig deployment, to well completion and first production—the impact of oil price increases on 2027 is more significant than on 2026 in our forecast.”

At the end of last month, the US and Israel launched strikes against Iran, triggering widespread retaliatory actions from Iran and resulting in the effective closure of the key Strait of Hormuz. This strait normally carries about one-fifth of the world’s oil shipments. As storage capacity fills up, oil production across the region is being affected by forced reductions.

The EIA estimates that the oil production affected by forced closures may peak in early April, with most of this coming from Iraq, while the impact on Kuwait, UAE, and Saudi Arabia is relatively minor.

The EIA report adds that a substantive closure of the Strait of Hormuz is expected to cause Middle Eastern oil production to decline further over the coming weeks. After passage through the Strait of Hormuz resumes, the shut-in capacity will gradually be released, and production will slowly recover. Once the Strait of Hormuz reopens, global oil production will consistently exceed consumption demand.

Given a significant stock build-up during the forecast period, the EIA expects OPEC+ will not significantly increase production next year. The EIA expects global oil inventories to increase by an average of 1.9 million barrels per day in 2026, and by 3 million barrels per day in 2027.

This week, US oil prices surged close to $120 per barrel before falling back to around $84. The EIA has again raised this year’s oil price outlook:

The forecast for Brent crude oil price in 2026 is $79 per barrel (previously $58 per barrel), and for 2027 it is $64 per barrel (previously $53 per barrel).

Due to the Middle East conflict, Brent crude oil prices are expected to stay above $95 per barrel over the next two months, fall below $80 per barrel in the third quarter, and drop to around $70 per barrel by year-end.

The surge in oil prices has pushed US retail gasoline prices to their highest level since July 2024. The EIA has raised its 2026 average US retail gasoline price forecast to $3.34 per gallon, 43 cents higher than the previous prediction.

The spike in oil prices has also prompted US shale oil producers to carry out a wave of hedging actions to lock in high prices for future sales. This move may enable producers to expand output even if oil prices fall in the coming months.

The EIA also raised its forecast for crude oil production in the Permian Basin in 2027 by 6%, citing additional pipeline capacity and higher oil prices as factors supporting growth in the region.

In addition, global diesel prices have sharply increased since the outbreak of the Middle East conflict. The EIA expects US diesel prices to rise further, with the average price in 2026 rising from $3.43 to $4.12 per gallon.

EIA will release its next Short-Term Energy Outlook report on April 7.

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