ATFX: EIA Crude Oil Report: Expected Shutdown Crude Oil to Resume in Q1 Next Year

ATFX: The U.S. Energy Information Administration (EIA) released its July Short-Term Energy Outlook (STEO) report. Market focus is on how the EIA views the recovery of crude oil supply after the U.S. and Iran signed a memorandum of understanding. We observed that within minutes of the report's release, the WTI price rose from $70.22 to $70.43, a relatively small increase, with its immediate impact weaker than the release of the weekly EIA crude oil inventory data.

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Yesterday, U.S. President Donald Trump approved a new round of strikes against Iran, causing market panic to surge sharply. International oil prices hit a high of $72.3. The upward momentum continued today, reaching a high of $74.67. Due to interference from news factors, the influence of the EIA's Short-Term Energy Outlook report is difficult to assess.

1. "Following the signing of the agreement and the increase in Strait traffic, we have raised our expectations for global oil production for the remainder of the year."

The EIA holds an optimistic view on the recovery of crude oil production in the second half of the year, believing that most of the crude production reduced due to U.S.-Iran issues will recover in Q1 2027. This core statement reinforces market concerns about supply-side expansion.

2. "Oil inventories will decrease by 2.2 million barrels per day in Q3 2026"

Although overall crude oil production will continue to recover in the second half of the year, in the short term, the number of tankers navigating the Strait of Hormuz remains low. Therefore, the EIA's assessment for Q3 oil inventories is still a decrease of 2.2 million barrels per day. Compared to the June STEO report, which mentioned an expected decrease of 7 million barrels per day in Q3, the July figure of 2 million barrels per day has been significantly revised downward.

3. "Brent prices are expected to average $74 per barrel in Q3 2026, down $27 per barrel from last month's Outlook."

In line with its judgment of a narrowing inventory decline in the second half of the year, the EIA also revised down its Brent crude price forecast by $27 per barrel. As of now, the latest Brent crude price is $78.42, already higher than the forecast in the July report.

4. "Gasoline prices are expected to average $3.80 per gallon in Q3 2026, below the more than $4.20 per gallon in Q2"

On the consumption side, the EIA expects gasoline prices to fall concurrently, with an average price of $3.8 per gallon in Q3, down about 9.5% from $4.2 per gallon in Q2.

5. "Natural gas consumption in the U.S. electric power sector will set a new record next year"

The U.S. primarily relies on natural gas for electricity generation, accounting for over 40%. Although natural gas prices may fall alongside oil prices, demand from the power sector remains high. According to the EIA's judgment, natural gas demand will grow by 3% in 2027. The EIA's assessment for natural gas prices is that spot prices will fall from $3.37 per million British thermal units (MMBtu) to below $3.5/MMBtu by 2027, as stable production offsets record demand.

6. "Wholesale electricity prices this summer will be lower than last summer"

The EIA's judgment of lower electricity prices stems from lower power plant costs due to falling natural gas prices. If summer heatwaves exceed expectations and extreme demand growth occurs, wholesale electricity prices could still rise. As of now, the U.S. national wholesale electricity price is about $45 per megawatt-hour.

ATFX Risk Warning, Disclaimer, Special Statement: The market carries risks, and investment requires caution. The above content only represents the analyst's personal views and does not constitute any operational advice. Do not treat this report as the sole reference. The analyst's views may change over time, and updates will not be notified separately.