WASHINGTON—In its first Short-Term Energy Outlook to include forecasts for 2026, the U.S. Energy Information Administration sees supply pressures pushing oil prices down over much of the next two years as global oil production grows more than global demand. Wholesale natural gas prices are predicted to increase as demand growth–led by liquefied natural gas exports–outpaces production growth and keeps inventories during the next two years at or below their previous five-year averages.

Macroeconomic assumptions are a key driver in the forecast, the Outlook notes, with that forecast assuming U.S. gross national production grows by 2% in 2025 and 2026.

Under the EIA analysis, increasing global oil production will overshadow demand growth, leading to declining oil prices. The forecast sees Brent crude oil prices averaging $74 a barrel in 2025–an 8% drop from 2024 prices–with another 11% drop in 2026 to $66/bbl.

“The unwinding of OPEC+ production cuts and strong growth in oil production outside of OPEC+ results in global oil production growing in our forecast,” the Outlook says. “We expect global oil production of liquid fuels will increase by 1.8 million barrels a day in 2025 and 1.5 MMbbl/d in 2026.”

OPEC+ is likely to increase production, but the EIA predicts the cartel will produce less crude oil than stated in its most recent production target as it seeks to avoid significant inventory builds. It notes the OPEC+ target was completed before the United States issued additional sanctions targeting Russia’s oil sector on Jan. 10, which the EIA says has the potential to reduce Russia’s oil exports to the global market.

U.S. Oil Output

Crude oil production set an annual record of 13.2 MMbbl/d in the United States in 2024, and the Outlook expects it to increase again, hitting 13.5 MMbbl/d in 2025.

“We expect crude oil production to grow less than 1% in 2026, averaging 13.6 MMbbl/d as operators slow activity due to price pressures,” the EIA explains. “In 2026, production growth begins to slow as drilling and completion activity is reduced in response to sustained lower crude oil prices and producers prioritizing value per barrel over production volume.”

West Texas Intermediate prices average $62 a barrel in 2026 in the Outlook forecast, down from $70 a barrel in 2025. The Permian region’s share of U.S. production will continue to increase, accounting for more than 50% of all U.S. crude oil production in 2026. The EIA says Permian production will climb nearly 300,000 bbl/d in both years, with the increase supported by improved well productivity and added pipeline takeaway capacity.

Newly drilled wells in the Permian region will become more productive as producers continue to implement new technology and better drilling practices, the forecast continues. Production from mature wells will remain relatively stable, the Outlook adds, with only mild reductions in output.

The expected Permian production growth in 2026 will be offset by contractions in other regions, with the EIA expecting a decrease of 170,000 bbl/d because of reduced drilling and completion activity in response to lower crude prices. Regional well productivity, takeaway capacity and access to international markets are also more limited in those other regions, the Outlook states.

“We forecast that crude oil production in the Gulf of Mexico will increase to 1.8 MMbbl/d in 2025 and remain near that volume in 2026,” the EIA says. “Compared with onshore tight oil production, Gulf of Mexico production is characterized by projects with longer lead times, and it is driven by a few large-scale projects that are less sensitive to short-term variations in crude oil prices.”

Natural Gas And LNG

The EIA predicts that over the next two years, natural gas demand in the United States will generally grow by more than supply. The Outlook sees gas supplies, including both production and imports, rising by 1.4 billion cubic feet a day in 2025, and demand, including domestic consumption and exports, jumping by 3.2 Bcf/d.

The Henry Hub spot price generally increases over the next two years, the forecast says, averaging $3.10 per million British thermal units in 2025 and $4.00/MMBtu the next year, up from a historically low average of $2.220/MMBtu in 2024. “We expect wholesale natural gas prices to increase because growth in demand–led by liquefied natural gas exports–outpaces production growth and keeps inventories during the next two years at or below their previous five-year averages during most of the forecast period,” the Outlook lays out.

Exports are the leading source of gas demand growth in the EIA forecast, with expectations that exports by pipeline and as LNG cargoes will increase by 2.9 Bcf/d in 2025, with most of that increase coming from LNG. The Outlook points out two LNG export facilities–Plaquemines LNG and Corpus Christi LNG Stage 3–started producing LNG in December, with the former facility loading and shipping its first LNG cargo on Dec. 26.

“We also forecast consumption in the residential and commercial sectors to increase in 2025 because we expect colder weather than in 2024. However, we forecast a decrease in consumption in the electricity power sector this year as natural gas prices rise and more renewables and coal are used to generate electricity, displacing some natural gas-fired generation capacity,” the EIA points out.

Monthly U.S. gas consumption typically peaks in January when demand for space heating is at its highest, the Outlook observes. When the STEO was completed in early January, EIA predicted that gas consumption for the month would average 119 Bcf/d, about the same as January 2024. The agency added, “U.S. natural gas consumption during the winter heating season (November–March) has become more variable as winters have generally become warmer, but periods of extreme cold could still happen.”

The agency estimated that the United States entered 2025 with 6% more natural gas in storage than the previous five-year average. However, it says that “with demand growth outpacing supply growth this year, we expect inventories will be drawn down to 4% below the five-year average by the end of 2025. As the storage surplus of the last two years diminishes, we expect some upward pressure on prices.”

Natural gas supply will grow by about the same amount as demand in 2026, the EIA projects, and storage inventories are expected to remain close to or below the five-year average much of the year, leading to the possibility of additional price increases in 2026.

Looking at LNG exports, the EIA sees their growth driving up natural gas demand, especially as additional export capacity from the Golden Pass terminal in Sabine Pass, Tx., owned by Qatar Energy and ExxonMobil, comes on line in the middle of the year.

“LNG exports grow by 2.1 Bcf/d in 2026 to reach an average of 16.2 Bcf/d. Additional demand growth in 2026 comes from pipeline exports, while consumption of natural gas in the residential, commercial and electric power sectors all decline slightly. Supply growth in 2026 is driven by an increase in dry natural gas production of 2.7 Bcf/d,” the EIA predicts.

In its forecast, the agency sees monthly Henry Hub spot prices remaining between $2.50/MMBtu and $3.90/MMBtu in 2025, and between $3.50/MMBtu and $4.40/MMBtu in 2026 as LNG exports increase.