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In the midst of US-Israeli war on Iran, crude oil prices will remain over $95 a barrel for the next two months, according to a US government forecast.
In its Short-Term Energy Outlook, the US Energy Information Administration (EIA) on Tuesday forecast that the Brent crude oil price will remain above $95 a barrel over the next two months before falling below $80 in the third quarter and around $70 by the end of the year.
As Iran has struck oil and gas sites across West Asia amid continuing conflict with Israel and the United States, West Asian oil and gas producers have announced production cuts, raising fears of shortages across the world. The closure of the Strait of Hormuz has further raised energy insecurity as around 20-25 per cent of the world’s seaborne oil and gas passes through the waterway.
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As a result, from the pre-war level of $72.48, oil surged to a high of $119.50 on Monday before settling at $98.96 and closing at $87.80 on Tuesday. It was the first time that oil surged past the $100-mark since 2022 when Russia launched the full-scale invasion of Ukraine.
In the forecast, the EIA said that prices will average at $64 in 2027.
The EIA said the closure of the Strait of Hormuz is expected to cause oil production in West Asia to fall further in the coming weeks — Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates have so far announced significant production cuts. It said the situation should gradually ease with the reopening of the Strait.
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But the EIA said the situation should not affect the United States.
As per the established trend, higher oil prices should lead to more oil production in the United States, the EIA said.
Similarly, gas prices have also forecast to be “relatively unaffected” in the United States.
As per the EIA, gas should cost 13 per cent less than the last month’s forecast.
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