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Buzzkill for oil producers EIA expands expected gloom to 2026; high supply, low demand: classic recipe for plunging prices
Steve Sutherlin Petroleum News
Global oil prices are going to fall significantly, taking Brent crude down from $68 per barrel in August to $59 on average in the fourth quarter of 2025 -- and lower still to $50 in early 2026, according to new projections by the U.S. Energy Information Administration in its Short-Term Energy Outlook released Sept. 9.
(See chart in the online issue PDF)
The culprits are large oil inventory builds as members of the Organization of the Petroleum Exporting Countries and its exporting allies increase production.
The EIA expects global oil inventory builds to average greater than 2 million barrels per day from 3Q25 through 1Q26.
Low oil prices in early 2026 will likely lead to supply reductions by both OPEC+ and some non-OPEC producers, moderating inventory builds later in 2026, the EIA said, adding that it forecast Brent to average $51 next year.
The EIA said it finalized this outlook before OPEC+ announced Sept. 7 that it will raise production by 137,000 bpd in October.
Recent price strength Crude oil prices are holding up so far, the EIA said.
"Global oil prices have not fallen significantly in recent months despite global oil inventory builds -- which we estimate as the difference between global oil supply and demand --averaging an estimated 1.6 million bpd from May through August," it said. "Despite our assessment that global oil production has been much higher than demand this summer, we have yet to see a significant increase in observable oil inventories."
The EIA said that while some third-party data sources that track non-OECD inventories do not show as significant of a stock build as EIA estimates suggest.
"This disconnect is likely the result of some of the excess production ending up in observable strategic reserves, particularly China, or other stockpiles used by countries for domestic consumption," the EIA said, adding that Organization for Economic Cooperation and Development inventories have recently moved above their seasonal average range from 2018--24 (excluding 2020 and 2021) on a days-of-supply basis.
Recent growth in OECD inventories suggest excess supply is beginning to show up in observable oil inventories at a time when oil demand hit its summer seasonal peak from higher driving and space cooling demand -- both of which have increasingly contributed to higher summer oil demand in recent years, the EIA said. Actual data on oil demand are often at a significant lag, sewing uncertainty in its estimates of summer global oil inventories, particularly outside of the OECD.
As temperatures begin to cool, the EIA expects strong oil supply growth in OECD inventories, which it sees exceeding the upper bound of their recent five-year average by the end of its forecast in 2026. It estimates global oil inventories will jump by an average of 1.6 million bpd in 2026, compared with an average annual increase of 1.7 million bpd in 2025.
Strong inventory builds could fill commercial storage options on land, which would prompt market participants to seek other, more expensive options such as floating storage, the EIA said. Some of the crude oil prices declines will likely reflect the higher marginal cost of storage.
Inventory builds will moderate in 2026 due to a combination of higher global oil demand and slightly lower oil production growth in response to lower oil prices, the EIA said.
Geopolitical issues remain a wild card for crude prices.
"Although we do not currently forecast any major supply disruptions, risks to oil supply remain. The ongoing tensions and negotiations related to the Russia-Ukraine conflict could affect supply, while further sanctions could be enacted." the EIA said. "Additionally, ongoing trade negotiations and legal challenges related to tariffs between the United States and its trading partners also could affect economic and oil demand growth, with implications for oil prices."
Lastly, given expectations of significant oversupply in late 2025, OPEC+ could revisit increased production plans, easing downward pressure on oil prices, the EIA said.
Global oil consumption and production The EIA said planned increases to OPEC+ production and supply growth outside of the group continue to drive global liquid fuels production growth in its forecast.
Global liquid fuels production will rise by 2.3 million bpd in 2025 and another 1.1 million bpd in 2026 in the EIA forecast.
Countries outside of OPEC+ will increase total liquid fuels production growth by 1.7 million bpd in 2025 and by 0.6 million bpd in 2026, driven by Brazil, Canada, Guyana, and the United States in particular, it said.
OPEC+ crude production is expected to rise by 0.6 million bpd in 2025 and 0.5 million bpd 2026, the EIA said. Forecast global liquid fuels consumption increases by 0.9 million bpd in 2025 and 1.3 million bpd in 2026.
U.S. gasoline consumption. The EIA said it forecast a slight increase in U.S. gasoline consumption next year, the first Short-Term Energy Outlook in which it has forecast an increase for 2026.
"The forecast for rising gasoline consumption is driven by an upward revision to the number of people of working age compared with our previous forecasts, and lower gasoline prices compared with our forecasts from earlier this year," the EIA said.
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