DTN Oil Update
Oil Futures Jump on Global Tight Supply Concerns
HOUSTON (DTN) -- Oil futures settled higher Tuesday on expectations of tighter global as ceasefire negotiations between the United States and Iran remain in pause, with both nations exchanging accusations and oil transit through the Strait of Hormuz continuing to face disruptions.
However, the Energy Information Administration (EIA) lowered its 2026 price forecast for Brent and WTI due to the likelihood of higher OPEC production, according to the agency's May Short-Term Energy Outlook (STEO) released today.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
The EIA forecasts Brent crude to average $95 bbl in 2026 and WTI to average $ 85.33 bbl, compared with April projections of $95.67 and $87.08, respectively.
"We now expect OPEC's spare capacity to average 2.5 million b/d in 2027, compared with our previous forecast of 3.8 million b/d," the EIA said in the May STEO report. "As oil production in the Middle East rises, we expect crude oil prices to fall."
The EIA said the May STEO numbers incorporated the UAE's departure from OPEC and excluded the country's production data from all historical and forecast in the current outlook.
The front-month NYMEX WTI futures contract rose $4.44 to $102.54 bbl, while the July ICE Brent futures contract increased $3.76 to $107.94 bbl.
Refined products also moved higher, with June RBOB gasoline futures advanced $0.1037 to $3.7035 gallon, the front-month ULSD contract increased $0.1982 to $4.1668 gallon.
The U.S. Dollar Index rose 0.361 points to 98.185 against a basket of currencies.
With negotiations over the Iran conflict still stalled, market participants are turning their attention to U.S. crude, gasoline and distillate stocks data due from the American Petroleum Institute (API) at 4:30 p.m. EDT. The API is scheduled to report stockpile figures for the week ended May 8. Last week, the API reported that commercial crude stocks fell by 8.41 million bbl for a second consecutive week. Gasoline inventories declined by 6.1 million bbl, while distillate fuel supply slumped by 4.6 million bbl during the same period.
On economic news, the Bureau of Labor Statistics reported Tuesday U.S. headline inflation hit a three-year high in April as the Consumer Price Index rose 3.8% year-on-year, driven by a persistent surge in energy costs linked to the Middle East conflict.
The reading surpassed market expectations for a 3.7% yearly increase and marked a significant jump from the annual 3.3% rate recorded in March.
