Key Takeaways:
The US Energy Information Administration lifted its 2026 Brent crude forecast to $87 a barrel from $82, citing severe shipping restrictions through the Strait of Hormuz that are keeping more Middle East production shut in than previously expected. The agency now sees WTI averaging $81 a barrel this year, up from $76, and expects prices to stay elevated until Middle East output recovers early next year.
"These assumptions hold, and we expect it will take until early 2027 for production and trade patterns to generally return to pre-conflict status," the EIA said in its August Short-Term Energy Outlook, published Tuesday. The agency still expects about 600,000 barrels a day to remain shut in through the end of next year.
The revision reflects a deeper supply shock than the July forecast anticipated. The EIA estimated shut-in production at 5.5 million barrels a day for July, with that figure set to rise in August as transit constraints through the Strait persist through the month. Global inventory withdrawals are running at 4.2 million barrels a day on average in the second quarter and 3.8 million barrels a day in the third, draining the buffer that would otherwise cushion price spikes. Brent futures traded at $88.8 a barrel Tuesday, up 1.2 percent.
The supply squeeze is rippling through refined products and inventories. The EIA raised its 2026 US wholesale diesel forecast 8.5 percent to $3.37 a gallon and gasoline 5.9 percent to $2.91 a gallon, while cutting its end-2026 US commercial crude inventory estimate 8.6 percent to 396 million barrels — below the five-year low through the rest of the year. US net crude imports fell below 1 million barrels a day in April and May as exports surged to records, keeping domestic stockpiles thin.
The Strait of Hormuz carries roughly 20 percent of global energy needs, and the repeated closures since February have made the chokepoint structurally unreliable for shippers. The EIA's base case assumes transit constraints ease in September and Middle East production largely returns to pre-conflict levels by early 2027, pulling Brent down to a $69 average next year. But the agency flags that a slower reopening would keep more than half a million barrels a day offline through 2027, extending the tightness.
The forecast divergence between crude and natural gas underscores how localized the shock is. The EIA cut its third-quarter Henry Hub gas price outlook 50 cents to $2.87 per million British thermal units, as Freeport LNG maintenance trimmed feedgas demand and strong US output kept inventories near record highs heading into October. US LNG exports are seen averaging 16.5 billion cubic feet a day in the third quarter, slightly below the prior projection.
For importers across Asia and Australia, the elevated crude path translates directly into higher fuel and freight costs. With oil, shipping and commodity prices rising together, the consumer price index faces renewed upward pressure — a dynamic that could complicate central bank easing paths into 2027 even as the EIA projects supply normalization. The last time Brent averaged above $85 for a sustained stretch was the 2022 post-invasion spike, when global inflation peaked near 9 percent.
This article is for informational purposes only and does not constitute investment advice.
