Fuel storage tanks at the Sunoco LP Terminal in Crockett, Calif. (David Paul Morris/Bloomberg)
March 10, 2026 3:43 PM, EDT
Key Takeaways:
- The U.S. raised its 2027 oil production forecast to 13.83 million barrels a day after recent price spikes tied to Middle East supply disruptions.
- The EIA said higher prices will more strongly affect 2027 output because production responds slowly to price changes amid regional shut-ins and surging retail fuel costs.
- The agency expects regional output to recover as the Strait of Hormuz reopens and forecasts further gains in shale production supported by hedging and new pipeline capacity.
The U.S. raised its forecast for domestic oil production next year after the recent surge in prices due to supply disruptions from key Middle East countries.
U.S. crude output is now expected to grow by 220,000 barrels a day in 2027 to 13.83 million barrels a day, according to the Energy Information Administration’s Short-Term Energy Outlook released March 10.
The new forecast represents an increase of about 500,000 barrels from the agency’s previous projection made in February. That report showed U.S. production was on course to peak this year and then decline in 2027.
“Because changes in oil prices take time to affect production — moving from investment decisions to rig deployment to well completion and first oil — the effect of higher prices in our forecast is more pronounced in 2027 than in 2026,” the EIA said in its latest report.
The U.S. and Israel began strikes on Iran late last month, triggering widespread retaliatory attacks from Tehran and the effective closure of the Strait of Hormuz, a critical waterway that normally handles a fifth of global oil flows. Production cuts are rippling across the region as storage capacity fills up.
Shut-in oil production will likely peak in early April, mostly in Iraq with smaller volumes in Kuwait, the United Arab Emirates, and Saudi Arabia, the EIA estimated. It added that output will gradually recover as flows through the strait resume.
U.S. oil prices surged this week to nearly $120 a barrel before easing to trade near $84 a barrel. The rally has already pulled U.S. retail gasoline prices to the highest levels since July 2024. The EIA raised its forecast for U.S. retail gasoline prices to an average of $3.34 a gallon in 2026, up by 43 cents from its last projection.
The surge in oil prices triggered a wave of hedging by shale drillers seeking to lock in elevated prices for future sales. The move could allow producers to ramp up output even if prices decline in coming months.
The EIA increased its forecast for crude oil production in the Permian basin by 6% in 2027 as new pipeline capacity and price incentives support growth.
Diesel prices, which have surged worldwide since the war began, were projected to rise even further in the U.S., to $4.12 a gallon in 2026 from $3.43, the agency said.
