The U.S. Energy Information Administration (EIA), in its September 9th Short-Term Energy Outlook (STEO), has significantly revised upward its Brent crude oil price projections for the next two years.

The agency now sees Brent spot prices averaging $91 per barrel in 2026 and $74 per barrel in 2027, representing increases of $4 and $5 per barrel, respectively, from previous forecasts. Additionally, the EIA projects Brent to average around $90 per barrel in the second half of this year, a substantial $8 per barrel upward adjustment from its August outlook.

The primary driver behind this adjustment is the expectation that Middle East supply disruptions will persist longer than previously anticipated. The EIA forecasts that a portion of Middle Eastern oil production capacity will remain offline for several more months due to constraints on shipping through the Strait of Hormuz and the Bab el-Mandeb strait. Middle East production outages averaged 6.7 million barrels per day in August, up from 5.0 million barrels per day in July, with the agency expecting outages to average roughly 5.7 million barrels per day in the fourth quarter.

Concurrently, global oil inventories are depleting rapidly. The EIA estimates that worldwide stockpiles have already fallen by approximately 400 million barrels this year and projects continued declines through the remainder of 2026. Given that supply recovery will take time, the EIA anticipates Brent prices will remain near the $90 per barrel mark during the second half of this year.

On Wednesday, Brent crude surged more than 3%, briefly surpassing the $100 per barrel threshold to trade above $101, marking the first time since July.

Middle East Supply Recovery Remains Key to Price Decline

The EIA's baseline scenario does not assume oil prices will stay elevated indefinitely. The agency projects that as Middle Eastern oil exports gradually recover, idle production capacity restarts, and global inventories rebuild, Brent prices will slowly retreat in 2027. The annual average is projected at $74 per barrel, softening further to approximately $67 per barrel by the second half of 2027.

However, the EIA also flagged significant uncertainty surrounding oil flows through the Strait of Hormuz and alternative shipping routes, which could lead to more volatile price movements than the baseline forecast suggests.

Notably, the EIA's model inputs for this month's report were cut off on September 3rd and do not incorporate subsequent market developments. This implies that the EIA's full-year forecast of $91 per barrel may still underestimate the short-term risk premium currently being priced into the market.

According to a Reuters report, oil shipments through the Strait of Hormuz have plummeted from roughly 8 to 9 million barrels per day before the conflict to less than 2 million barrels per day currently, further intensifying concerns over the duration of supply disruptions.

Oil's Rally Past $100 Rekindles Inflation Risks

The rising oil price is once again becoming a critical variable for global inflation and monetary policy. Analysts note that if Brent sustains levels above $100 per barrel, energy costs could feed through to transportation, manufacturing, and consumer spending, amplifying inflationary pressures and potentially prompting major central banks to maintain higher interest rates for an extended period.

Meanwhile, the buffer capacity of the global oil market is shrinking. The U.S. Strategic Petroleum Reserve currently holds approximately 290 million barrels, near its lowest level since 1982, while several key consuming nations have seen their inventories decline due to months of Middle East supply interruptions.

Therefore, the core signal from the EIA's upward revision is not that oil prices will remain above $100 per barrel indefinitely, but rather that the supply shock from the Middle East is forcing the market to reassess the central price range for oil over the next one to two years. Should Hormuz transit resume and offline capacity restart as the EIA anticipates, prices could still retreat in 2027. However, if disruptions escalate further, the current forecasts of $91 and $74 per barrel face continued upside risks.