Crude price fall to continue in 2025-26 as global production outpaces demand: US EIA

Crude oil spot prices will continue to decline throughout 2025 and 2026 as slower demand growth and OPEC+ production will continue to cause global oil inventories to build, the United States Energy Information Administration forecast June 10.

In its June Short-Term Energy Outlook, the US EIA said it expects Brent crude prices to average $59.24/b throughout 2026 after ongoing declines in 2025. It expects Brent to end 2025 at an average price of $66/b, down from 2024's end average of $84/b.

It forecasts similar downward pressure for WTI, which is expected to average $62.33/b in 2025 and $55.58/b in 2026.

US domestic industry's spending cuts in response to lower prices -- already seen in lower-than-expected US rig counts from EIA's May outlook -- are likely to result in a decrease in production by the end of 2026.

In the second quarter of 2025, US production hit an all-time high of 13.5 million b/d, EIA said. It now expects the US to produce 13.3 million b/d by the fourth quarter of 2026.

That trend will coincide with rising global inventories, as global demand growth stalls and OPEC+ accelerates unwinding of voluntary production cuts.

"These factors contribute to our expectation that global oil production will exceed consumption over the forecast period, causing global oil inventories to build and putting downward pressure on oil prices," the EIA said.

US output stalls

The EIA's expectation of slightly lowered US production was still more bullish than a new analysis by S&P Global Commodity Insights.

The latest Global Crude Oil Markets Short-term Outlook, released May 10, projected US production would fall to 12.96 million b/d in 2026 -- down 378,000 b/d from previous forecasts, the first year-over-year decline in nearly a decade outside the 2020 COVID-19 pandemic. By the end of 2026, the report said, US production could be down 640,000 b/d from mid-2025 levels.

"In a lower price environment, US operators are likely to protect shareholder returns by reducing upstream spending," Jim Burkhard, Commodity Insights' vice president and global head of Crude Oil Research, said in the report. "The result is a deceleration in growth to end the year, with the greatest impacts to production coming in 2026."

In recent earnings reports, US oil producers have consistently promised shareholders lower capital expenditures in the face of suddenly lower prices. On May 8, Occidental Petroleum announced it would reduce its midpoint capital guidance by $200 million and cut domestic operational spending by $150 million, in response to a macro environment that CEO Vicki Hollub said was "creating headwinds for the sector."

US oil and gas rig count fell by 16 to 600 for the week ending May 28, according to S&P Global Commodity Insights data. The Permian Basin lost 15 rigs that week, leaving 266 in operation -- the patch's lowest since 2021.

US producers' operational retreat will coincide with the EIA's expectation of continued global production growth and ongoing inventory builds, the agency said.

EIA expects global liquid fuels production to increase by 1.6 million b/d in 2025, 0.2 million b/d higher than in the May STEO, before an increase of 0.8 million b/d. The outlook expects countries outside OPEC+ to fuel growth in 2025, but foresees growth from Brazil, Guyana and Canada being offset by the drop in US production in 2026 as OPEC+ drives global production increases next year.

Global inventories increased for the first five months of 2025, the EIA said, and will "continue to grow significantly over the forecast period" by an average of 0.4 million b/d for the remainder of 2025, with inventory builds averaging 0.8 million b/d in 2025, 0.4 million b/d higher than the May STEO.

The price pressures should result in a decrease of about 35 cents/gal in gasoline prices from 2024 to 2025, EIA said, with a further 2026 decrease of 16 cents/gal.

Uncertainty looms

The EIA said that "significant uncertainty" continued to hover over the forecast, with natural disasters and geopolitics presenting potential oil supply risks.

Among them are wildfires near Canada's Alberta oil sands, which have already disrupted some of the region's production and could yet spread. Russia's war on Ukraine -- which has seen increasingly intense drone and missile attacks and a new European Union proposal to lower the Russian oil price cap from $60/b to $45/b -- could escalate and impact trade flows. So, too, could a potential force majeure on oil exports in Libya, the agency said. Under US President Donald Trump, sanctions regimes against Russia, Iran and Venezuela could change swiftly.

The forecast also remained uncertain of specific OPEC+ members' "willingness and ability ... to coordinate future production targets" in the face of falling prices and increasing non-OPEC+ supply.

Further unknowns are added by the raft of trade negotiations between the United States and its trading partners, EIA noted, which "could greatly affect oil prices."