The U.S. Energy Information Administration (EIA) released its Short-Term Energy Outlook report on Tuesday, indicating that oil prices are likely to face downward pressure over the next two years due to a significant oversupply situation.
Key Highlights:
Market Outlook:
Analysts predict an oversupplied oil market in 2025 and 2026, primarily driven by slowed demand growth in major energy-consuming countries like the U.S. and China.
Price Projections:
The EIA forecasts Brent crude oil prices to decline by 8%, averaging $74 per barrel in 2025, and further decreasing to $66 per barrel in 2026.
U.S. crude prices are anticipated to average $70 per barrel in 2025, dropping to $62 in 2026, marking the first outlook for that year.
U.S. Oil Production:
The EIA slightly increased its estimate for U.S. oil production in 2024 to 13.55 million barrels per day (bpd), up from a previous estimate of 13.52 million bpd.
The Permian Basin in Texas and New Mexico, recognized as the largest shale oil-producing region globally, is expected to account for over 50% of U.S. output by 2026.
Global Production and Demand:
Global oil and liquid fuel production is projected to average 104.4 million bpd in 2025, an increase from the earlier forecast of 104.2 million bpd.
Conversely, global demand is expected to average 104.1 million bpd, revised down from 104.3 million bpd, and remains below pre-pandemic levels.
Supply Dynamics:
The EIA attributes the oversupply situation to decisions made by the Organization of Petroleum Exporting Countries (OPEC) and its allies to ease supply curtailments, along with expectations of increased output from non-OPEC producers.