In its latest short term energy outlook (STEO), which was released on May 12, the U.S. Energy Information Administration (EIA) widened its global oil deficit projection for 2026.
According to its May STEO, the EIA sees world petroleum and other liquid fuels consumption outweighing production by 2.56 million barrels per day this year. In its previous STEO, which was released in April, the EIA projected that world petroleum and other liquid fuels consumption would outweigh production by 0.30 million barrels per day this year.
In its latest STEO, the EIA forecasts that the deficit will come in at 8.47 million barrels per day in the second quarter of 2026 and 4.42 million barrels per day in the third quarter, before flipping to a glut, whereby production outweighs demand, of 1.99 million barrels per day in the fourth quarter.
The EIA’s previous STEO saw a glut emerging earlier. In that STEO, the EIA projected that the oil market would be in a deficit of 5.09 million barrels per day in the second quarter, before being oversupplied by 0.29 million barrels per day in the third quarter and 3.16 million barrels per day in the fourth quarter.
Looking at 2027, the EIA’s latest STEO predicts a glut of 3.86 million barrels per day for the year. This is larger than the 2027 glut of 3.31 million barrels per day projected in the EIA’s previous April STEO.
The EIA’s May STEO sees an oil glut of 3.88 million barrels per day in the first quarter of 2027, 3.30 million barrels per day in the second quarter, 3.55 million barrels per day in the third quarter, and 4.69 million barrels per day in the fourth quarter. In its April STEO, the EIA projected a glut of 3.71 million barrels per day in the first quarter of next year, 2.87 million barrels per day in the second quarter, 2.89 million barrels per day in the third quarter, and 3.78 million barrels per day in the fourth quarter.
Back in its March STEO, the EIA was predicting a glut of 1.87 million barrels per day in 2026 and 3.00 million barrels per day in 2027.
The EIA highlighted that its latest STEO assumes that the Strait of Hormuz reopens in late May. It also pointed out that its latest forecast includes the U.S. Strategic Petroleum Reserve release announced on March 11 and the collective release of strategic stocks announced by the International Energy Agency.
“We estimate that global oil inventories will fall by an average of 8.5 million barrels per day in 2Q26, pushing Brent crude oil prices to an average of around $106 per barrel in May and June,” the EIA noted in its May STEO.
“Once the traffic through the Strait of Hormuz gradually begins to resume in June and shut-in oil production gradually returns, we assume oil prices will begin to fall, decreasing to an average of $89 per barrel by 4Q26 as global oil inventory withdrawals lessen,” it added.
“We assess that most shut-in oil production will be fully restored by January 2027 and that global oil inventories will again start building, helping oil prices gradually lower to an average of $79 per barrel in 2027,” it went on to state.
The EIA highlighted in its May STEO that global oil markets “are in a period of heightened volatility and uncertainty due to the de facto closure of the Strait of Hormuz”, which it described as “a major world oil transit chokepoint through which nearly 20 percent of global oil supply flowed prior to military action that began on February 28”.
“The strait has been effectively closed to shipping traffic since,” the EIA said.
In its April STEO, the EIA noted that, prior to the conflict, its assessment was that the global oil market was oversupplied and that global oil inventories were building quickly, “which was reflected in steadily falling oil prices over the previous year”.
“We expected this trend to continue over the next two years, as strong growth in production from both non-OPEC+ producers and increased production targets from OPEC+ countries outpaced growth in global oil demand,” the EIA added in that STEO.
“However, the conflict in Iran has quickly shifted market dynamics, as producers in the region have been forced to shut in significant volumes of oil production, leading to near-term tightness in the market,” it went on to state.
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