EIA sees steep fall in oil price as supply growth looms
Sopuruchi Onwuka, with agency reports
Prices for global reference crude oil grades in the international markets are destined for sharp decline as oilfield technology and efficient operations translate to cheaper and higher volumes of the commodity, according to the latest Short-Term Energy Outlook (STEO) from the Energy Information Administration (EIA) of the United States.
The agency which provides the American markets on energy related matters declared in the week that a “significant decline in the price of oil” as global supplies begin to build up in the second half of the year.
The Oracle Intelligence reports that the forecast has significant implication on the Nigerian fiscal projections for the year, which were premised on so-far unrealistic $75 per barrel of crude oil which is the nation’s leading export commodity.
Misalignment of the Nigeria’s fiscal calculations with the realities in the domestic petroleum industry operations and the dynamics shaping price movements in the international markets have continued to create widening fiscal gaps in the 2025 federal budget; leading to activation of another trend of borrowing plan by the government.
Federal government hardly reviews its budgets downwards even when it is clear that expectations of over 1.0 million barrels per day in additional crude oil production and surge in oil prices have turned out to be critical fiscal blunders.
If the market predictions from the EIA fall through, it would entail that Nigeria’s basic assumptions 2.06 million barrels of oil per day at $75 per barrels for the 2025 budget would have become a complete ruse.
Market sources reported on friday that thin trading liquidity, rangebound price movements, and focus on scheduled Trump-Putin meeting in Alaska marked trading activities in the week, as ICE Brent still traded around the $66 per barrel mark. LNG prices already shed some $0.50/MMBtu in the week as gas traders seem to expect some semblance of a deal coming through.
In directly contradicting OPEC, the IEA predicted that global oil supply would rise quickly than expected in 2025-2026, forecasting a 2.5 million b/d output hike this year, up 400,000 b/d compared to its previous outlook, citing OPEC+ unwinding.
Based on increasing efficiency from US wells and accelerated production hikes from Opec+, the EIA forecast that Brent spot prices would fall from an average of more than $70 per barrel in July to $58 in the fourth quarter as the pending growth in global supplies “vastly surpasses growth in demand for petroleum products.”
That would be the lowest quarterly price for Brent since 2020, according to the EIA.
The agency said Brent should average $67 per barrel for all of 2025, down $2 from its previous projection. It is also predicting $51 per barrel for 2026.
“There’s a lot of uncertainty in the petroleum market. In the past, we have seen significant drops in oil price when inventories grow as quickly as we are expecting in the coming months,” EIA Acting Administrator Steve Nalley commented.
US crude production should average 13.6 million barrels per day in December, which would be an all-time high for the nation, the EIA said. Operators are continuing to find ways to pump more out of their wells, according to the agency.
However, the looming oversupply will lead US production to sink to 13.3 million bpd in 2026, including 13.1 million bpd in the fourth quarter of that year, the EIA said.
The EIA still sees an upward trend for Henry Hub. It predicted the US gas benchmark will rise 40 cents to $3.60 per million British thermal units in the second half of 2025 and climb to $4.30 by 2026.
