EIA says global oil output to recover to pre-war levels by year-end

The U.S. Energy Information Administration said Tuesday that global crude oil production and trade flows are expected to return to near pre-conflict levels by the end of 2026, with most shut-in production from the Iran war restored during the first quarter of 2027. The forecast, contained in the agency's July Short-Term Energy Outlook, marks a turning point for a market that absorbed the loss of more than a billion barrels of supply since hostilities began in late February.reuters+2

Brent crude has now given back virtually all of its wartime gains, falling roughly 43% from its peak near $126 per barrel in April to trade around pre-war levels near $72. OPEC+ approved a further production increase of 188,000 barrels per day from August on Sunday, adding to similar hikes for June and July.chosun+2

Wall Street Races to Cut Forecasts

Major banks have sharply revised their outlooks. J.P. Morgan JPMorgan Chase & Co. ↗ 0.44% lowered its second-half Brent forecast, projecting an average of $86 per barrel in the third quarter and $80 in the fourth quarter, with prices exiting 2026 at $78 and averaging $64 in 2027. The bank's strategists described the market as undergoing a "system reboot," warning that stranded oil now exiting the Strait of Hormuz is colliding with a market that has already adapted to scarcity.thestreet+3

Macquarie slashed its 2026 Brent average to $77 per barrel from $89, and its 2027 outlook to $64 from $74. Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.17% now sees Brent averaging $85 this year and $75 next year. Morgan Stanley ↘ 0.03% estimates 80% of lost output could be restored by December, with full recovery projected for early 2027.bloomberg+2

Surplus Looms in 2027

The International Energy Agency warned in June that global supply could exceed demand by 5 million barrels per day in 2027 as Gulf production surges by roughly 8 million barrels per day to 110 million barrels per day. The IEA cut its 2026 demand forecast by 700,000 barrels per day, reflecting the dual pressures of high fuel prices and product shortages during the conflict.spglobal+1

The EIA now forecasts Brent averaging $74 per barrel in the third quarter of 2026 before declining to $65 in 2027. However, Reuters Thomson Reuters Corporation ↗ 3.30% reported Monday that oil prices rose more than 2% on Tuesday after attacks on vessels near the Strait of Hormuz revived fears of fresh disruptions, a reminder that depleted buffer reserves leave the market vulnerable to future shocks even as the broader recovery takes hold.reuters+3