US EIA: Global oil production to return to pre Iran war levels by the end of this year
The U.S. Energy Information Administration stated on Tuesday that global oil production?and?trade flows will fully recover by the end this year after the disruptions caused due to the Iran War.
The EIA reported that the global benchmark Brent crude oil price will average $74 per barrel on the spot market in the third quarter this year. This is down from an?average of $85 in June. Last month, the agency forecast Brent prices to average more than $101 per barrel in the third quarter.
As a result of the months-long wartime blockade of Strait of Hormuz, refiners in Europe and Asia have been forced to cut fuel production.
In recent days, vessel movement through the waterway increased following an initial deal between the U.S. and Iran. The passage through the waterway is not completely safe yet, but EIA's annual oil production forecasts have been raised while oil and motor fuel prices are being lowered.
EIA expects that most of the Middle East oil production previously shut down will be back online in the first quarter 2027. The agency stated that this will increase global oil supply and reduce withdrawals of stockpiles. This will return the oil markets to an oversupply state, which will put pressure on prices.
The EIA's short-term energy outlook report for July stated that "we expect continued oil inventory accumulation to continue putting downward pressure on crude prices over the next 12 months."
The agency expects that oil prices will average around $65 per barrel by the end of next year. This is down from its previous forecast of $79 per barrel in 2027.
The EIA stated that lower crude oil prices would contribute to a decrease in retail gasoline prices in the United States. The EIA now expects U.S. Motor Fuel Prices to average $3.80 per gallon during the third quarter. This is down from $4.21 per gallon during the second quarter.
The Iran?war's knock-on effect had driven U.S. fuel prices to multiyear highs. This was a major concern for President Donald Trump, and his Republican Party in advance of the November midterm elections. (Reporting from Shariq Khan in New York and Scott DiSavino; editing by David Gregorio, Deepa Babington).
(source: Reuters)
