The U.S. Energy Information Administration (EIA) projected that international oil prices could drop to around $40 per barrel. Hong Seong-ki, a researcher at LS SECURITIES, advised on the 22nd that there is a need to prepare for the possibility of a sharp decline in international oil prices from the fourth quarter of this year (October to December) to the first quarter of 2026 (January to March).
The EIA lowered its forecast for international oil prices this year from $65.3 per barrel to $63.6 per barrel through the 'August Short-Term Energy Outlook (STEO).' The 2026 forecast for international oil prices was significantly revised down from $54.8 per barrel to $47.8 per barrel. Researcher Hong noted, 'Considering that the EIA has been conservative in changing forecasts, this is quite an unusual occurrence.'
The biggest factor in the change of forecast is the production increase rate of the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ coalition of major oil-producing nations. The EIA revised its production outlook for OPEC+ this year upward by 600,000 barrels per day (bpd), with 1 bpd equaling 1 million barrels per day. As a result, the supply surplus was also raised from the May forecast of 400,000 bpd to 1.6 million bpd, indicating a significant accumulation of inventory.
The Organization for Economic Cooperation and Development (OECD) also predicted that oil inventories among OECD member countries, currently at 2.8 billion barrels, would increase to about 3 billion barrels in 10 months. Researcher Hong explained that the EIA's forecast is similar taking into account the ratio of OECD member countries in global oil inventories (about 40%). As inventories increase, international oil prices are bound to show a downward trend.
The market is also paying attention to the fact that what is leading the supply increase is not the U.S. shale oil or OPEC as in the past. This signifies that it could be difficult to adjust the supply volume easily. Along with the increase in production by OPEC+, countries such as Brazil, Kazakhstan, and Guyana are also expected to significantly ramp up production starting in the fourth quarter of this year.
If, combined with an economic recession, oil consumption declines, there is a possibility that the supply surplus issue could reach levels seen in 2015-2016. At that time, international oil prices fell to around $30.
The EIA anticipates that international oil prices will hit a low of $45 per barrel in 2026. Researcher Hong remarked, 'The EIA's forecast for oil price declines seems somewhat excessive,' but also noted, 'There is a need to prepare for a drop in prices to the $50 per barrel level.'