The U.S. Energy Information Administration expects around 600,000 barrels per day of Middle Eastern oil production to remain offline through the end of 2027, despite expecting most production and trade routes to return to pre-Iran war levels early next year, amid disruptions to tanker traffic and higher crude and fuel prices.
The administration, the independent statistical and analytical arm of the U.S. Department of Energy, said severe restrictions on oil tanker passage through the Strait of Hormuz had prompted it to raise its estimates for production outages in the coming months, compared with its forecast issued last July.
Hormuz restrictions and alternative routes
The administration’s forecasts are based on the assumption that oil traffic through the Strait of Hormuz will remain severely restricted through the end of this August, before gradually increasing during the coming September. They also assume that recent threats to tankers carrying Saudi oil through the Bab el-Mandeb Strait will not cause additional production disruptions.
The average volume of crude and petroleum products transported through the Strait of Hormuz fell by around 77% to 4.9 million barrels per day in the second quarter of 2026, compared with around 21.6 million barrels per day in the final quarter of 2025, before the war broke out.
By contrast, Saudi Arabia diverted part of its exports away from Hormuz using the East-West pipeline to the Red Sea port of Yanbu, helping raise oil traffic through the Bab el-Mandeb to 8.1 million barrels per day in the second quarter, from around 5.4 million barrels per day in the final quarter of 2025.
The administration said some Saudi oil could be transported through Egypt’s Suez Canal and SUMED pipeline, but noted that these alternatives take longer, cost more and have lower capacity than the usual route through the Strait of Hormuz.
Crude price forecasts raised
In the markets, Brent crude futures rose 1.12% to $88.70 per barrel at the time the source was prepared, while West Texas Intermediate crude futures climbed 1.33% to $83.22 per barrel.
The Energy Information Administration raised its forecast for the average Brent crude price in the third quarter to around $85 per barrel, an increase of $11 from its estimate last July. It expects the price to fall to $78 in the fourth quarter and then to an average of $69 during 2027, as production recovers and inventories rise.
The administration also raised its estimate for the average Brent crude price in 2026 to $87 per barrel, from $82 in its previous forecast. The revision came after supply disruptions led to a drawdown of around 4.2 million barrels per day from global inventories in the second quarter, with withdrawals expected to continue at an average of 3.8 million barrels per day in the third quarter.
Gasoline and diesel estimates raised
The revisions extended to U.S. fuel prices, with the administration raising its forecast for the average retail price of regular gasoline in 2026 to $3.78 per gallon, from $3.64 in last July’s report. It also raised its estimate for the price of on-road diesel to $4.85 per gallon, from $4.61.
For 2027, the administration raised its forecast for the price of gasoline to $3.29 per gallon, compared with $3.09 in its previous report, while raising its estimate for diesel to $4.07 from $4.02.
U.S. inventories below five-year levels
The administration expects U.S. commercial crude oil inventories to remain below their lowest levels recorded over the past five years through the end of 2026. Inventories fell by 25 million barrels in May, 15 million in June and 4 million in July, driven by higher exports, lower imports and increased refinery runs.
