The U.S. Energy Information Administration (EIA) has revised its oil price forecasts upward in its latest Short-Term Energy Outlook (STEO), citing a more severe-than-expected global oil supply disruption due to sustained and significant restrictions on crude shipments through the Strait of Hormuz.

The EIA now projects the average spot price for Brent crude oil in 2026 will be $87 per barrel, up from the previous forecast of $82 per barrel. For the third quarter of 2026, the agency expects Brent to average around $85 per barrel, with prices largely holding near early-August levels for the coming months.

The updated outlook is based on the assumption that the severe transport restrictions in the Strait of Hormuz will persist through August. This will further reduce the volume of oil moving through the strait over the next few months, causing a larger-than-expected drawdown in global crude inventories and keeping prices elevated.

The EIA anticipates that as Middle Eastern production capacity gradually recovers in early 2027, increased supply will push prices back down. The 2027 average price forecast has been raised to $69 per barrel, from a previous estimate of $65 per barrel.

On Tuesday, Brent crude oil futures rose 1.2% to settle at $88.80 per barrel.

Refined Product Price Forecasts Also Revised Upward

The expectation of higher oil prices has also translated into the U.S. refined products market.

The EIA has increased its 2026 wholesale diesel price forecast for the U.S. by 8.5% to $3.37 per gallon, up from $3.10 per gallon. The 2027 forecast was raised by 6.3% to $2.62 per gallon, from $2.47.

For gasoline, the EIA raised its 2026 wholesale price forecast by 5.9% to $2.91 per gallon, from $2.75 per gallon. The 2027 forecast was increased by 9.0% to $2.32 per gallon, from $2.13.

U.S. Crude Inventories Expected to Remain at Low Levels

On the inventory front, the EIA projects that U.S. commercial crude oil inventories will remain below the five-year low observed between 2021 and 2025 through the end of 2026.

The agency has significantly lowered its year-end 2026 U.S. crude inventory forecast by 8.6% to 396 million barrels, down from a previous estimate of 433 million barrels. The 2027 inventory forecast was left unchanged at 432 million barrels.

The EIA noted that since mid-April, a combination of increased U.S. crude exports, reduced imports, and high refinery utilization has driven weeks of consecutive declines in U.S. crude inventories. The agency expects that strong international demand for U.S. crude will keep net U.S. crude imports below historical averages through 2027.

Oil Prices Expected to Fall in 2027 as Middle East Capacity Recovers

Despite the high short-term supply risk, the EIA forecasts that oil prices will enter a downward trajectory in 2027.

The EIA expects that most of the Middle East’s crude oil production will recover to near pre-conflict average levels by early 2027. However, some supply disruptions, amounting to about 600,000 barrels per day, are expected to persist through the end of 2027.

As the bulk of capacity is restored, global oil supply will increase, allowing inventories to rebuild. This will push Brent crude oil prices down gradually, with the full-year average for 2027 falling to $69 per barrel.

U.S. Natural Gas Price Forecasts Sharply Reduced

In contrast to oil, the EIA has significantly lowered its natural gas price forecasts.

The agency now expects the average Henry Hub natural gas spot price for the third quarter of 2026 to be $2.87 per million British thermal units (MMBtu), 50 cents lower than the July forecast.

Ongoing maintenance at the Freeport LNG facility has reduced demand for natural gas feedstock from LNG export terminals, while strong U.S. natural gas production has kept prices low.

The EIA expects that U.S. natural gas inventories will be near record highs by the start of October, which will keep Henry Hub prices below $3/MMBtu in the coming months.

Regarding U.S. LNG exports, the EIA forecasts an average of 16.5 billion cubic feet per day in the third quarter of 2026, slightly below last month’s projection.

Meanwhile, the startup of Mexico’s Energia Costa Azul LNG project and rising gas demand from U.S. power generation are expected to drive continued growth in U.S. natural gas pipeline exports through 2027.

Data Center Demand Continues to Push Up Electricity Use

The EIA has also revised its forecast for Texas electricity demand.

As data center construction drives U.S. electricity demand growth, power generation is expected to increase in 2026. However, after Texas Governor Greg Abbott announced a pause on new data center development projects on August 3, the EIA lowered its forecast for local electricity demand.

The EIA now projects Texas power load will grow by 6% in 2027, a significant downward revision from the previous estimate of 14%.

In terms of the generation mix, solar and new natural gas-fired power plants remain the primary sources of U.S. power generation growth in 2026. In the first half of 2026, U.S. solar, hydro, and wind generation were up 21%, 9%, and 6%, respectively, compared to the same period in 2025.

The EIA expects that continued additions of renewable energy capacity will support this growth trend through 2027. At the same time, relatively low natural gas prices will drive further growth in gas-fired generation, while coal-fired generation will continue to decline due to lower natural gas costs.

U.S. Coal Export Forecast Raised

On the coal front, a sharp increase in U.S. coal exports in April and May has prompted the EIA to raise its 2026 U.S. coal export forecast to 102 million short tons.

Metallurgical coal exports grew steadily in the first half of 2026, supported by new mines and restarted operations. Thermal coal exports rebounded in the second quarter after a decline in the first quarter.

The EIA noted that global market shifts, including coal-to-gas switching in Europe and Asia, have improved the market environment for U.S. coal exporters.