EIA forecasts tight global oil markets until mid-2025
In the most recent Short-Term Energy Outlook (STEO) report for March 2025, the US Energy Information Administration (EIA) projects that global oil markets will remain relatively tight.
EIA projects that global oil inventories will decline in second-quarter 2025, driven partly by reduced crude oil production in Iran and Venezuela. As a result, the Brent crude oil spot price is forecast to rise to about $75/bbl by third-quarter 2025 from $70/bbl.
However, EIA expects global oil inventories to increase later in 2025 and into 2026 as OPEC+ unwinds production cuts and non-OPEC oil production rises. This increase in supply is anticipated to place downward pressure on oil prices, leading to an average Brent crude oil price of $68/bbl in 2026.
Market uncertainties
In February, the average spot price of Brent crude oil was $75/bbl, $4/bbl lower than the price in January and $8/bbl lower than the same period last year. The decline in crude oil prices throughout February was primarily influenced by concerns over economic growth stemming from the potential imposition of tariffs by both the US and other trade partners.
On Feb. 1, US President Donald Trump issued an Executive Order introducing tariffs on imports from Canada, Mexico, and China. However, the implementation of tariffs on most goods from Mexico and Canada has been postponed until early April.
“The evolving tariff policy has added uncertainty around expectations for global oil demand growth, concerns about which had persistently weighed on oil prices over the last year,” EIA said.
“On the supply side, any potential ceasefire in the Russia-Ukraine conflict could add Russian oil volumes back into the market. Lastly, continued supply growth from producers outside of the OPEC+ agreement, primarily in North and South America, adds additional downward pressure to our price forecast in 2026,” EIA said.
This month's outlook features the implementation of new US sanctions on Iranian crude oil, announced on Feb. 24, which could lead to the exclusion of substantial quantities of crude oil from the market.
In addition, EIA anticipates that the recent decision to revoke licenses for Venezuelan oil production and exports to the US will result in a decline in Venezuela's oil output starting in March. This development is expected to significantly tighten near-term oil market balances compared to the February STEO report.
“Despite less production from Iran and Venezuela in this month’s forecast, we still expect OPEC production will grow over the next two years. OPEC+ reaffirmed its commitment on March 3 to proceed with ‘a gradual and flexible return’ of the 2.2 million b/d voluntary adjustments starting on April 1, 2025. This announcement included the stipulation that the production increases could be paused or reversed subject to market conditions, which leaves some uncertainty about whether increases will materialize in line with the announcement,” EIA said.
US natural gas
Colder-than-expected weather in January and February led to higher natural gas consumption and significant withdrawals from storage. EIA now estimates that natural gas inventories will fall below 1.7 tcf by end-March—10% below the previous 5-year average and 6% lower than last month’s forecast.
The outlook for electricity generation has also been revised upward for the next 2 years. EIA now expects the electric power sector to consume more than 36 bcfd of natural gas on average in 2025 and 2026, representing increases of 2% and 1%, respectively, from last month's forecast. Overall, natural gas inventories are projected to be 4% lower in 2025 and 3% lower in 2026 compared with last month's outlook.
Higher natural gas consumption and reduced storage levels have led EIA to increase its forecast for the Henry Hub spot price. The Henry Hub price is now projected to average around $4.20/MMbtu in 2025—11% higher than last month's forecast.
For 2026, the Henry Hub price is expected to average near $4.50/MMbtu, an 8% increase from the previous forecast.
