U.S. energy agency raises oil price forecast as war drags on

The twists and turns of the war in the Middle East make it difficult to forecast the future of oil prices. But the U.S. Energy Information Administration took a stab at it this week anyway, releasing its latest Short-Term Energy Outlook on Wednesday.

The U.S. Energy Information Administration expects benchmark Brent crude to average around $90 a barrel for the second half of this year. That’s almost 5% higher than the agency’s last forecast.

“I think it’s as accurate as you can be, but there’s a lot of assumptions behind any oil price forecast,” said Eric Smith, associate director of the Tulane Energy Institute.

The EIA said part of the problem is that global oil reserves have fallen by 400 million barrels so far this year. But the agency also forecasts more oil will gradually start flowing through the Strait of Hormuz.

Shippers might be able to adjust to a new normal, according to Eugene Gholz, who focuses on national security and economic policy at the University of Notre Dame.

“The cargo is so valuable that I expect more and more people to suck up the cost” of their oil tankers occasionally being attacked in the Strait of Hormuz, he said.

Gholz added that some oil-producing countries are using their own national tankers to shuttle oil out of the Strait and transfer it to other ships waiting safely outside.

But nobody really knows what will happen, he said. He pointed to predictions from the end of last year: “No one was forecasting that there would be a war in Iran that would cause a huge disruption, and so all the forecasts are wrong.”

Even the EIA noted that this report was finalized on Sept. 3 and “does not specifically account for market events after that day.”