EIA Slashes Q3 Oil Price Forecast, Sees Supply Normalization by Year-End

The return of shut-in output will happen in two phases. Global production and trade flows should normalize by the end of this year. Most of the Middle East wells that were offline will not resume until the first quarter of 2027, the EIA said. That means non-Middle East production and adjustments in trade routes will do the heavy lifting in the near term. The later return of the region's wells will reduce withdrawals from stockpiles and keep prices contained in the months ahead.

Lower crude prices will push U.S. retail gasoline lower. The EIA now expects motor fuel to average about $3.80 a gallon in the third quarter, down from $4.21 in the second quarter. The Iran war had pushed pump prices to multi-year highs, creating a political liability for President Donald Trump and his party ahead of November's midterm elections. The drop in gasoline prices eases that pressure.

There is no guarantee the easing continues. The Iran deal is preliminary. Any breakdown in talks could reverse the vessel traffic gains and snap the supply risk back into the market. The EIA's track record this year reflects that uncertainty. It swung from an above-$101 forecast to $74 in a single month. For now, the agency is betting on normalization. Its updated path removes a layer of supply-risk premium that had been baked into crude since the war began. The Strait of Hormuz reopening is the critical choke point. Each week of smoother passage lowers the chance of a price spike that would upend the new baseline.