From staff reports The U.S. Energy Information Administration expects a significant decline in the price of oil as growth in the global supply of oil vastly surpasses growth in demand for petroleum products.
In its August Short-Term Energy Outlook, EIA expects the Brent crude oil spot price to average less than $60 per barrel in the fourth quarter of 2025 – the first quarter with average prices that low since 2020.
OPEC+ announced last week that it will unwind its oil production cuts by September, which is a year ahead of its previous schedule. For the first time since EIA began publishing an OPEC+ production forecast in 2023, EIA expects most global oil production growth to come from OPEC+ countries. EIA forecasts the supply growth will outpace demand growth, leading to quickly growing inventories.
“There’s a lot of uncertainty in the petroleum market,” said EIA acting Administrator Steve Nalley. “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 expects lower oil prices to lead to lower U.S. retail prices for gasoline and diesel and to pull domestic oil production down from the record highs in 2025.
In related matters: • U.S. crude oil production will average an all-time high, nearly 13.6 million barrels per day, in December 2025, driven by continued increases in domestic well productivity, EIA predicts.
By 2026, declining oil prices lead EIA to expect U.S. producers will pull back on drilling and well completion activity – a trend that has continued through most of 2025. EIA forecasts U.S. crude oil production will average 13.3 million barrels per day in 2026.
• Declining oil prices will contribute to significantly lower prices for gasoline and on-highway diesel in 2026. EIA expects retail gasoline to average about $2.90 per gallon and on-highway diesel to average less than $3.50 per gallon next year. Both of those average price points are about 20 cents per gallon lower than this year’s.
• Increases in U.S. natural gas prices are expected as production remains relatively flat and exports of liquefied natural gas increase. EIA believes the Henry Hub natural gas spot price will rise from an average $3.20 per million British thermal units (MMBtu) in July to almost $3.60 per MMBtu in the second half of 2025 and $4.30 per MMBtu in 2026.
• Greater than 2% growth in electricity demand is anticipated in both 2025 and 2026, driven primarily by the commercial and industrial sectors. EIA forecasts electricity sales to the commercial sector to rise by 3.1% in 2025 and 4.9% in 2026, while electricity sales to industrial consumers are forecast to rise by 1.8% in 2025 and 3.0% next year.
• Coal production is expected to reach 520 million short tons (MMst) in 2025, about 2% higher than last year, EIA reported. The United States produced more electricity from coal this year because coal became a more economical source of power generation relative to natural gas. EIA forecasts that production will fall to 491 MMst in 2026, with more coal plants scheduled to retire and remaining coal plants holding large coal stockpiles built up in 2025.