EIA Short Term Energy Outlook

Short Term Energy Outlook

Analysis 

The EIA cut its 2026 Brent forecast to $82 a barrel, down $13 from last month and the largest downward revision this cycle. The move follows the June 18 U.S. Iran memorandum reopening the Strait of Hormuz, with tanker traffic picking up fast enough that EIA now expects most shut in Middle East production back online by year end. Retail gasoline gets pulled down with it, falling to $3.64 for 2026 from $3.90 last month.

The story underneath the price cut is how much faster supply came back than demand did. Global oil inventories are now expected to draw by just 2.2 million barrels a day in the third quarter, versus more than 7 million in last month’s forecast, and EIA sees the market flipping back to outright oversupply by 2027. Natural gas tells a calmer story. Henry Hub sits at $3.67 for 2026, with inventories running 6% above the five year average heading into a summer where record production is expected to outpace even a demand record in the power sector.

Brent has come down from a wartime peak near $103 in the second quarter to an expected $70 by year end, and this report pencils in $65 for all of 2027. That is a steep round trip, and it puts the burden of proof back on supply discipline. If shut in barrels return on schedule, the path lower holds. If the Strait reopening stalls or OPEC+ leans the other way, this forecast gets revised again just as fast as it was this month.