Global oil inventories are expected to fall by an average of 8.5 million barrels per day in Q2 2026, keeping Brent prices at about $106 per barrel in May and June, the US Energy Information Administration said in its Short-Term Energy Outlook released Tuesday.
"As oil production in the Middle East rises, we expect crude oil prices to fall, dropping to an average of $89/bbl in 4Q26 and $79/bbl in 2027," the EIA said.
Brent crude spot prices climbed to $138/bbl on April 7 and averaged $117/bbl on a monthly basis in April, after the Strait of Hormuz disruption restricted global oil flows, EIA said.
Disruptions in the Strait of Hormuz are expected to keep global oil markets tight after 10.5 mmb/d of Middle East crude output went offline in April, the US EIA said.
EIA expects the Strait of Hormuz to remain largely closed until late May, with shipping activity recovering gradually from June, according to the STEO.
Iraq, Saudi Arabia, Kuwait, UAE, Qatar and Bahrain together curtailed 10.5 mmb/d of crude production in April as regional conflict intensified.
EIA expects oil shipments through the strait to stay below pre-conflict levels for the rest of 2026, while some disrupted Middle East crude production may remain offline over that period.
EIA said disrupted supply will trigger large oil inventory draws in May and June, limiting downward pressure on crude prices even as shipping flows through the Strait of Hormuz improve.
The report forecasts global oil inventories will decline by 2.6 mmb/d in 2026, sharply wider than the 300,000 b/d decline projected in last month's outlook.
Meanwhile, the UAE exited OPEC effective May 1, 2026, prompting the EIA to exclude UAE production data from both historical figures and forward projections in the report.
EIA now expects OPEC spare crude production capacity to average 2.5 mmb/d in 2027, below its prior estimate of 3.8 mmb/d because the UAE held excess output capacity.
US propane inventories climbed to record levels in late 2025, and the EIA expects inventories to stay elevated through 2027 because production growth continues to exceed demand growth.
The agency expects propane stockpiles to peak in October 2026 before winter heating demand lowers inventories from November through March, although levels should remain above the five-year average.
Lower US propane prices from abundant supplies will likely support stronger exports to Asia as buyers seek alternatives to disrupted Persian Gulf shipments.