US EIA forecasts crude oil to average below $60 by 2026

The US Energy Information Administration (EIA) has projected a notable decrease in crude oil prices, anticipating that global oil supply will significantly outpace the demand for petroleum products.

The EIA forecasts in its August Short-Term Energy Outlook (STEO) that the Brent crude oil spot price will average less than $60 per barrel (bbl) in the fourth quarter of 2025 (Q4 2025).

This marks the first instance of such low average prices since 2020.

Furthermore, OPEC+ recently declared that it would end its oil production cuts by September 2025, a year earlier than initially planned.

This adjustment is expected to contribute to most of global oil production growth coming from OPEC+ countries for the first time since the EIA began its OPEC+ production forecast in 2023.

The anticipated supply growth is projected to exceed demand, leading to a rapid increase in inventories.

EIA acting administrator Steve Nalley said: “There is a lot of uncertainty in the petroleum market. In the past, we have seen significant drops in oil price when inventories grow as quickly as we are expecting in the coming months.”

The EIA also predicts that the lower oil prices will result in reduced US retail prices for gasoline and diesel and will cause domestic oil production to fall from the record highs seen in 2025.

Global oil prices are expected to drop from over $70/bbl in July to an average of around $58/bbl in Q4 2025, with a further decline to just above $50/bbl in 2026.

US crude oil production is set to reach an all-time high of nearly 13.6 million barrels per day (mbbl/d) in December 2025, but declining prices in 2026 are likely to reduce drilling and well completion activities.

The EIA estimates that US crude oil production will average 13.3mbbl/d in 2026.

However, the EIA's petroleum forecasts face uncertainties, particularly around supply-related risks.

Factors such as a break in the Israel-Iran ceasefire, heightened tensions or additional sanctions related to the Russia-Ukraine conflict, or changes in trade policy could impact supply and demand dynamics, potentially affecting oil prices.

Regarding natural gas, the EIA expects US prices to rise, with the Henry Hub natural gas spot price increasing from an average of $3.20 per million British thermal units (MBtu) in July to almost $3.60/MBtu in the second half of 2025.

This is expected to further rise to $4.30/MBtu in 2026 due to steady production and growing exports of liquefied natural gas.

The macroeconomic outlook used by the EIA in the STEO is based on S&P Global's model, which includes tariff adjustments announced in April and the 90-day temporary suspension of tariffs granted to most countries.

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