Brent oil prices are set to trade above $95 a barrel over the next two months as the Iran war disrupts supplies, before falling to around $70 by the end of the year, the Energy Information Administration said on Tuesday in a monthly report.
Oil shipments have been largely blocked from using the Strait of Hormuz, a critical chokepoint through which a fifth of global oil flows every day, and this will cause Mideast oil output to fall further in the coming weeks, the EIA said in its Short-Term Energy Outlook.
Saudi Arabia began oil output cuts, sources said on Monday, joining other Gulf producers, including Iraq and Kuwait, in reducing production amid the constraints.
Those production shut-ins will gradually ease as transit resumes, the EIA said, adding that once oil flows are reestablished through the Strait, global oil production will continue to outpace demand.
Brent crude futures have risen around 21% so far this month, according to LSEG data, last trading at $88 a barrel at 12:35 p.m. EST.
The EIA raised its price forecast for Brent by 37% from the prior month to $79 a barrel in 2026. Brent should fall below $80 a barrel in the third quarter of this year, it said.
It also forecast U.S. retail gasoline prices to be around $3.34 a gallon, 14.7% higher than its prior forecast, while it pushed up its forecast on diesel prices to $4.12 a gallon, about 20.1% higher than its previous forecast.
“Although we expect most of the gasoline price increase to be passed through to the retail price in the coming weeks, we also expect that the normalisation of refining and retail margins will occur more slowly. The net effect will be continued upward pressure in the second quarter that lags behind the initial increase,” the EIA said in the report.
Higher oil prices are set to encourage more U.S. crude production, with output expected to average 13.61 million barrels per day this year, rising to 13.83 million bpd in 2027, the EIA said.
That compares with the EIA’s previous forecasts of 13.6 million bpd for 2026 and 13.32 million bpd for 2027.
U.S. crude futures are up around 25% so far this month, last trading around $83.60 a barrel at 12:25 p.m. EST.
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