By Georgina McCartney, Arathi Somashekar and Siddharth Kaval
HOUSTON, March 10 (Reuters) – Brent crude is set to trade above $95 a barrel in the next two months as the war in Iran hampers supplies, before falling to around $70 by the end of the year, the Energy Information Administration said in a monthly report on Tuesday.
Oil shipments have been largely blocked from using the Strait of Hormuz, a key strait through which a fifth of the world’s oil passes each day, and that will cause Middle East oil production to fall further in the coming weeks, the EIA said in its short-term energy outlook.
Saudi Arabia began cutting oil output on Monday, sources said on Monday, joining other Gulf producers including Iraq and Kuwait in cutting production amid the disruptions. Those production shutdowns will gradually ease as transit resumes, the EIA said, adding that once oil flows through the strait are restored, global oil production will continue to exceed demand.
Brent crude futures are up about 21% so far this month, according to LSEG data, last trading at $88 a barrel at 12:35 a.m. EST.
The EIA raised Brent prices to $79 a barrel by 2026, up 37% from last month. Brent should drop to $80 a barrel in the third quarter of this year.
It also forecast US retail gas prices to be around $3.34 a gallon, up 14.7% from its previous forecast, while it raised its forecast for diesel prices to $4.12 a gallon, up about 20.1% from its previous forecast.
“Although we expect the majority of gasoline prices to be passed on to retail prices in the coming weeks, we also expect normalization of oil and retail conditions to occur more slowly. The net effect will be continued upward pressure in the second quarter, lagging behind the initial increase,” the EIA said in the report.
Higher oil prices are set to boost U.S. crude output, with production forecast to average 13.61 million barrels per day this year, rising to 13.83 million barrels in 2027, the EIA said.
That compares with the EIA’s previous forecast of 13.6 million bpd for 2026, and 13.32 million bpd for 2027.
U.S. crude futures are up about 25% so far this month, last trading around $83.60 a barrel at 12:25 p.m. EST.
(Reporting by Georgina McCartney and Arati Somasekhar in Houston and Siddharth Kaval in New York; Editing by Chizo Nomiyama and Susan Fenton)
