EIA hikes oil price forecasts as Iran war drains stockpiles

The U.S. Energy Information Administration raised its oil price forecasts for this year and next on Tuesday, Oct. 6. The agency said global inventories are falling fast and diesel markets remain tight because of the war with Iran.reuters

In its October Short-Term Energy Outlook, the EIA now expects Brent crude to average about $98 a barrel in 2026. That is 8% above last month's forecast. The agency expects Brent to average about $105 a barrel in the fourth quarter, $14 above its previous estimate, and $84 in 2027, which is $10 higher than before.eia+1

Supply risks and a diesel squeeze

The EIA said an attack on Saudi Arabia's East-West Pipeline shows that physical crude supplies could be disrupted again. A shortage of diesel is also raising demand for crude, because refiners are trying to produce as much diesel as they can. "We expect Middle East oil shipments to remain constrained through the fourth quarter of 2026," the agency said.moomoo+1

U.S. retail diesel prices reached a record last month. The EIA expects them to stay above $6 a gallon in October, then ease slowly to an average of about $4.50 a gallon in 2027. In a separate outlook released the same day, the agency forecast a 30% rise in heating oil prices this winter, though it expects milder weather in the Northeast to offset part of that increase.indexbox+2

Workarounds lift Gulf exports

The forecast assumes Middle East production and exports will recover gradually. That depends on more traffic through the Strait of Hormuz, more use of alternative export routes, and more ship-to-ship transfers. Saudi Arabia has restarted shipments through the East-West Pipeline to the Red Sea, which bypasses the strait. Some exporters are also using "dark transits," in which tankers switch off their tracking systems before transferring cargoes at sea. The EIA said these steps brought Gulf oil flows, not counting Iran, back above 81% of pre-war levels in September. It expects crude production shut-ins to fall from 4.5 million barrels per day in the fourth quarter to 2.7 million in the first quarter of 2027.indexbox+1

A steady climb in forecasts

The EIA has raised its forecasts several times since the U.S.-Israeli war on Iran began on Feb. 28. In September, it projected Brent would average about $91 in 2026 and $74 in 2027, and estimated that global inventories had already fallen by about 400 million barrels this year. Before the strait was disrupted, it carried about one-fifth of the world's oil supply.eia+2

Oil futures fell earlier on Tuesday as concerns about Middle East supply eased. Industry executives still warned that the market has little cushion left. Chevron CEO Mike Wirth said the loss of buffer inventories has made the market more vulnerable and has pushed up the floor for oil prices.reuters+1