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Crude down, gas up
EIA 2025-26 forecasts oil price dropping on supply, gas increasing on demand
Kristen Nelson Petroleum News
The U.S. Energy Information Administration's Short-Term Energy Outlook for January, released Jan. 14, is the first short-term forecast to include 2026, and that forecast sees the Brent crude oil spot price decreasing, from an average of $81 per barrel in 2024 to $74 in 2025 and $66 in 2026. The reverse is true for the natural gas price at Henry Hub, which averaged $2.20 per million British thermal units in 2024, and is forecast to increase to $3.10 this year and $4 in 2026.
The dropping Brent price is based on a forecast of increased oil production in 2025 and 2026, globally and domestically, while the increasing Henry Hub spot price is based on increasing demand, led by liquefied natural gas exports from the U.S., expected to outpace growth and keep inventories of natural gas at or below the 2020-24 average over the time period.
Crude prices EIA said it is forecasting downward pressure on oil prices over 2025-26 on the expectation that production will grow more than demand. This is based on OPEC+ production cuts ending and expected strong production growth from other areas.
Global liquid fuels production is projected to grow by 1.8 million barrels per day in 2025 and by 1.5 million bpd in 2026.
The agency said that while it is forecasting an increase in OPEC+ production, "we expect the group will produce less crude oil than stated in its most recent production target in an effort to avoid significant inventory builds."
Brent averaged $74 per barrel in December, EIA said, $4 per barrel lower than in December 2023, and averaged $81 per barrel in 2024, after averaging $82 per barrel in 2023.
Oil prices are, however, expected to increase in the coming months on the recent extension of production cuts by OPEC+, with inventory withdrawals of 0.5 million bpd on average expected in the first quarter, followed by an expected increase in OPEC+ production in the second quarter, with non-OPEC+ production also expected to increase, but at a lower pace than the last 2 years.
"This production growth, coupled with relatively weak growth in oil demand growth will cause global oil inventories to accumulate from mid-2025 through 2026," putting downward pressure on prices through 2026, leading to the $66 per barrel average in that year.
US crude production U.S. crude production averaged 13.2 million bpd last year, an annual record, EIA said, and is expected to increase to 13.5 million bpd this year and then again by a smaller amount, less than 1%, to 13.6 million bpd in 2026 "as operators slow activity due to price pressures."
West Texas Intermediate is forecast to average $62 per barrel in 2026, down from a forecast $70 per barrel this year, with the Permian region's share of U.S. production continuing to grow to 50% of U.S. production in 2026, a growth expected to "be offset by contraction in other regions," EIA said.
The slowing of U.S. production growth in 2026 is expected to occur "as drilling and completion activity is reduced in response to sustained lower crude oil prices and producers prioritizing value per barrel over production volume."
Permian production is forecast to continue to grow on "improving well productivity and added pipeline takeaway capacity," with new Permian wells expected to "become more productive as producers continue to implement new technology and better drilling practices. We also expect production from mature wells to remain relatively stable, with only mild reductions in output."
Flat production from regions outside the Permian is expected this year, EIA said, with a 4% decrease, some 170,000 bpd, forecast for 2026, from reduced drilling and completion activity on lower oil prices, regional well productivity, takeaway capacity and more limited access to international markets.
Gulf of Mexico crude production is forecast to increase to 1.8 million bpd this year and remain near that volume next year, with Gulf of Mexico production -- compared to tight oil onshore production -- characterized by longer lead time projects and "driven by a few large-scale projects that are less sensitive to short-term variations in crude oil prices."
Natural gas Natural gas demand in the U.S. is expected to "generally grow by more than natural gas supply" over the next 2 years, EIA said, with supply of natural gas forecast to rise by 1.4 billion cubic feet per day this year, and demand to grow by 3.2 bcf per day.
"Exports are the leading source of natural gas demand growth in our forecast," the agency said, expected to increase by 2.9 bcf per day this year, most of that from LNG exports. "Two new LNG export facilities -- Plaquemines LNG and Corpus Christi LNG Stage 3 -- started producing LNG in December 2024," with Plaquemines shipping its first cargo Dec. 26.
LNG exports averaged 12 bcf per day in 2024 and are forecast to average 14 bcf per day this year and 16 bcf per day in 2026.
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