The US Energy Information Administration or EIA stated in a monthly update yesterday that disruptions to crude oil production in the Middle East have increased significantly since our April Short-Term Energy Outlook (STEO). It assesses that Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain collectively shut in 10.5 million barrels per day (b/d) of crude oil production in April. This report assumes that the Strait of Hormuz remains effectively closed until late May, with shipping traffic beginning to pick up in June.

Oil shipments through the strait, however, will not likely reach pre-conflict levels until later this year, and we expect some oil production in the Middle East to remain disrupted over that period. Disrupted production leads to large oil inventory draws, particularly in May and June, limiting downward oil price pressures even after flows through the strait rise. Because this month we assume both a later reopening of the Strait of Hormuz and a longer recovery period for shut-in oil production, it forecast global oil inventories will decrease by 2.6 million b/d this year, compared with a 0.3 million b/d decrease in last month’s STEO.

EIA noted that the UAE announced its departure from OPEC, effective May 1, 2026. Our May STEO incorporates that change. OPEC production numbers in this outlook exclude data from the UAE, both for historical and forecast periods. Because the UAE held spare crude oil production capacity, we now expect OPEC’s spare capacity to average 2.5 million b/d in 2027, compared with our previous forecast of 3.8 million b/d.

The Brent crude oil spot price increased sharply in April, reaching a high of $138 per barrel (b) on April 7 and averaging $117/b for the month, as the de facto closure of the Strait of Hormuz tightened global oil supplies. Global oil inventories will fall by an average of 8.5 million b/d in the second quarter of 2026 (2Q26), keeping Brent prices around $106/b in May and June. As oil production in the Middle East rises, EIA expects crude oil prices to fall, dropping to an average of $89/b in 4Q26 and $79/b in 2027. For the full year 2026, EIA expects spot Brent to average $95 per barrel while WTI Crude is likely to average $85.70 per barrel.

Powered by Commodity Insights