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EIA forecasts Brent price in $50s in 2026
August outlook says global supply expected to exceed demand growth; Brent to be below $60 in 4th quarter, lowest average since 2020
Kristen Nelson Petroleum News
The major takeaway from the U.S. Energy Information Administration's August Short-Term Energy Outlook, released Aug. 12, is the agency's forecast that the crude oil price will fall below $60 per barrel by the end of this year and average "near $50 per barrel through 2026."
The agency said this significant drop in oil price is based on growth in global oil supplies "vastly" surpassing growth in demand.
EIA said the Aug. 3 announcement by OPEC+ members that the organization would unwind its oil production cuts by September, a year ahead of its previous schedule, is expected to increase already large inventory builds through next year, resulting in "significant downward pressure on oil prices."
"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," said EIA Acting Administrator Steve Nalley.
In EIA's July Outlook Brent was forecast to average $69 this year and $58 in 2026; this month's forecast is for an average of $67 in 2025 and $51 per barrel in 2026, drops of 2.4% and 12% respectively.
For the change in global oil inventory, the July forecast was 1.1 million bpd for this year and the same for 2026; the August forecast is for 1.6 million bpd this year and 1.4 million bpd in 2026, increases of 0.6% and 0.3% respectively.
OPEC+ oil production for this year was forecast at 43.2 million bpd in July, and 43.8 million bpd in 2026. The August forecast is 43.7 million bpd this year, up 1%, and 44.2 million bpd in 2026, up 0.9%.
Global issues EIA's July forecast was for Brent to average $71 per barrel in the fourth quarter; the August average falls to $58 per barrel, and around $50 per barrel in early 2026.
The agency said it now expects Brent to fall to $49 per barrel in March and April of next year.
Global liquid fuels production is forecast to rise by 2 million bpd on average in the second half of this year compared to the first half of the year, with OPEC+ contributing half of the increase and non-OPEC producers led by the United States, Brazil, Norway, Canada and Guyana providing the other half of the increase.
Demand, on the other hand, is expected to be up 1.6 million bpd in the second half of the year compared to the first half, leading to inventory build growing by almost half a million bpd in the second half, on top of the 1.4 million build rate in the first half, resulting in a build of 1.9 million bpd in the second half of the year and 2.3 million bpd in the first quarter of 2026.
EIA said that in similar periods of global inventory build exceeding 1 million bpd for a sustained period, such as in 2020, 2015 and 1998, "crude oil prices declined by 25%-50% from the previous year."
That level of inventory build will result in increasingly expensive storage options for crude, with floating storage or strategic stock building possibly "increasingly used to match imbalances between supply and demand" and crude oil prices falling to reflect the higher marginal cost of storage as available storage on land is filled.
As prices drop below $50 per barrel, the agency said, some producers will reduce supply, with OPEC+ expected to reduce production by 0.2 million bpd in 2026 compared to the fourth quarter of this year.
Non-OPEC countries dependent on supply from short investment cycles, such as the United States, "will also see oil production drop," with U.S. annual average production for 2026 expected to decline by 0.1 million bpd on average from the record 13.4 million bpd in 2025, a 0.7% drop to an average of 13.3 million bpd.
US natural gas Henry Hub averaged almost $3.20 per million British thermal units from April through July, EIA said, 80 cents below the April forecast. In contrast to the April forecast, natural gas working storage inventories are expected to be 2% higher than the five-year average, not 3% lower.
The end-of-season storage forecast is largely the result of more production and fewer liquefied natural gas exports than expected in April, "with maintenance at multiple terminals extending over the second quarter."
Brent is forecast to average $3.60 per million Btu this year, up from $2.20 in 2024 and rising to $4.30 in 2026.
Natural gas production has risen in recent months and is expected to grow 3% above 2024 volumes, with growth in the Permian of 2 bcf per day and 0.9 bcf per day each in the Haynesville and Appalachia regions this year, "sustained in part by the deployment of drilling rigs to natural gas-intensive shale plays," EIA said.
Marketed natural gas production is expected to be largely unchanged in 2025, although falling oil prices will reduce associated production, particularly in the Permian.
EIA said natural gas "production declines will be muted as producers strategically position themselves to meet rising demand from several LNG projects that are set to enter service in late 2025 and 2026."
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