US government projects global crude oil production to rebound by end of 2026
The EIA's revised outlook forecasts a return to pre-conflict output levels as the US-Iran deal reopens the Strait of Hormuz, with Brent crude expected to slide toward $65 by 2027.
Global oil production and trade flows are expected to recover faster than previously forecast after the Iran war and disruption around the Strait of Hormuz, according to the US Energy Information Administration.
In its July Short Term Energy Outlook, the EIA said oil shipments through the strait are expected to resume in the third quarter of 2026, with most shut in production returning by the first quarter of 2027. The agency had previously expected a longer disruption to some Middle East production and a slower normalization of flows.
The revised outlook points to a faster supply rebound after one of the largest oil market disruptions in modern history. The EIA now expects rising inventories over the next year to put downward pressure on crude prices, with Brent falling to an average of $65 a barrel in 2027.
That is a sharp revision from the agency’s earlier forecast. In June, the EIA expected Brent to average $95 a barrel in 2026 and $79 a barrel in 2027 as production gradually recovered and trade flows normalized.
Brent was trading around $74 a barrel Tuesday morning, close to the EIA’s new third quarter forecast. Reuters reported that Brent climbed to $73.85 after attacks on vessels near the Strait of Hormuz revived concerns over shipping security.
The market reaction shows the tension in crude right now. Supply is coming back faster than expected, but shipping risks have not disappeared. Reuters reported that a Qatari LNG tanker and a Saudi flagged crude vessel were attacked near the strait, keeping geopolitical risk priced into the market.
Still, the EIA’s message is clear: the immediate oil shock is fading. Barrels that had been trapped inside the Persian Gulf are expected to move back into global markets, shifting attention from scarcity to the risk of oversupply.
That shift is already visible in market expectations. The Wall Street Journal reported that Persian Gulf producers are ramping output as shipments through the Strait of Hormuz resume, raising the risk of a market share battle and a near term supply glut.
Saudi Arabia has also cut prices for Asian buyers as regional producers compete to place barrels into the market, according to the Journal. That pricing pressure suggests producers are preparing for a more crowded crude market rather than a prolonged shortage.