EIA: Middle East Oil Output to Lag Pre-Conflict Levels Through 2027

A significant portion of Middle Eastern oil production will remain offline through the end of 2027, even if regional trade routes normalize early next year, according to a new forecast from the U.S. Energy Information Administration (EIA). The agency's latest outlook points to a persistent supply shortfall stemming from conflict-related disruptions, prompting it to revise global output estimates downward.

Persistent Production Shortfall

The EIA's August short-term energy outlook projects that about 600,000 barrels per day (bpd) of production from the region will remain shut-in through the end of 2027. This forecast holds even under the agency's assumption that most Middle East output and global trade recover to pre-conflict levels by early 2027.

Ongoing disruptions to shipping in the Strait of Hormuz and attacks on energy infrastructure have forced producers to slash output. The EIA estimates that 5.5 million bpd of Middle East oil production was shut-in during July, a volume representing over 5% of global consumption.

Global Market Impact

The prolonged production cuts have significant implications for the global energy balance. The EIA has lowered its forecast for global oil output to an average of 100.8 million bpd for the current year, a 1% decrease from its July outlook.

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Meanwhile, the forecast for world oil demand remains unchanged at 104 million bpd. This widening supply deficit prompted the agency to raise its oil price forecasts for both 2026 and 2027, signaling expectations of higher energy costs for consumers and industries.

Near-Term Uncertainty

The EIA anticipates that flows through the critical Strait of Hormuz will face severe constraints through August, with shipments only beginning to increase slowly in September.

The agency's report includes a note of caution, referencing that previous forecasts for an imminent increase in shipments did not materialize as regional conflict continued. This highlights the high degree of uncertainty surrounding the timeline for a full market recovery.