U.S. energy agency ups forecast of American oil and gas output

(The Center Square) – The war in the Middle East will lead to significantly more production of crude oil and natural gas in the U.S. during the next two years along with relatively stable gasoline prices for American consumers, according to the latest market assessment by the U.S. Energy Information Administration, an agency within the Department of Energy.

“The ‌effective ⁠closure of the critical chokepoint, the Strait of Hormuz, through which a fifth of global oil flows ⁠every day, will cause Mideast oil output to fall further in the ⁠coming weeks,” the agency’s analysts wrote in the agency’s Short-term Energy Outlook for March. Oil and gas production will gradually return to the Middle East as ship traffic in the region resumes, according to the agency’s latest analysis.

The agency forecasts U.S. oil production will rise about 3.8% through the end of 2027 while domestic natural gas output will increase about 4.3%, with the prices of both projected to return to near pre-war levels.

“Reductions in the flow of liquified natural gas (LNG) through the Strait of Hormuz have caused natural gas prices in Europe and Asia to increase. However, we expect U.S. natural gas prices to be relatively unaffected by this development, as LNG export facilities were already operating at a high level of utilization prior to the Middle East conflict, limiting the ability to export additional volumes in the near term,” the agency said in the March market outlook.

The agency projects U.S. crude oil production will average 13.6 million barrels per day in 2026, unchanged from 2025, and 13.8 million barrels per day in 2027. The agency’s forecasted U.S. oil production in 2027 is up 0.5 million barrels per day than projected in the February energy outlook, reflecting changing market conditions.

Tulane Energy Institute Associate Director Eric Smith said most of the additional oil and gas production will come in the Permian and Eagle Ford shale basins in Texas and New Mexico rather than in the Gulf of America, where a second auction of oil and gas leases is scheduled for Wednesday. 

“The wells drilled in the Gulf take at least a couple of years to drill and complete and bring into production. In the shale basins, the drillers can crank up production in months, not years, and that is what we’re likely to see,” said Smith.

The Department of Energy estimates the average retail price of U.S. regular grade gasoline will increase from $3.10 cents per gallon in 2025 to a projected $3.34 cents per gallon in 2026 before dropping to $3.18 cents per gallon in 2027.

The price of a barrel of Brent crude oil, the European benchmark, will remain above $95 per barrel during the ‌next two months as the war continues, and then decline within six months into the $80 range before falling to about $70 per barrel by the end of 2026, according to the agency’s estimates.

The agency released its latest monthly analytical report on a day when Brent oil futures for delivery in April fell $11.16, or 11%, to settle at $87.80 a barrel.

Meanwhile, U.S. West Texas ‌Intermediate (WTI) crude settled at $83.45 a barrel, down $11.32, or 11.9%, on the day.  On Monday, WTI crude future shot above $119 per barrel in intraday trade amid Iranian missile and drone attacks and fears the Strait of Hormuz would be closed to ship traffic for a prolonged period of time.

In an effort to reduce pressures on U.S. consumers, Energy Secretary Chris Wright on Monday said the Trump administration is "talking about coordinated releases" from the Strategic Petroleum Reserve in conjunction with other countries.

Iran's Islamic Revolutionary Guard Corps said on Tuesday, the war’s 11th day, that it will not allow "one litre of oil" to be exported from the region until U.S. and Israeli attacks cease.

Soon after the war began, President Donald Trump said he expected the fighting would last four or five weeks and later added his war goals would only be met by Iran’s “unconditional surrender.”

The Energy Information Administration forecasts Middle Eastern oil output will fall significantly in the days ahead due to shutdowns of production facilities and closure of the Strait of Hormuz.

Iraqi output will drop 70% and Kuwaiti production will be temporarily halted, according to the forecast. Despite these temporary disruptions, increased oil production in the U.S., Brazil, Guyana and Argentina is projected to create a global supply surplus, driving down Brent crude prices by late 2026.