U.S. crude production is projected to reach a record 13.41 million barrels per day in 2025, driven by enhancements in well productivity. However, a decline in oil prices is expected to lead to a decrease in output in 2026, as forecasted by the Energy Information Administration in a monthly report released.
The anticipated drop in 2026 production to 13.28 million bpd would mark the first reduction in output since 2021 for the world’s largest producer, according to EIA data. The average price for the international benchmark Brent is expected to be $51 per barrel next year, down from the EIA’s earlier estimate of $58 per barrel, following the decision by the Organization of the Petroleum Exporting Countries and its members to accelerate production increases.
In last month’s report, the EIA had estimated U.S. crude output at 13.37 million bpd for both 2025 and 2026. The United States produced 13.21 million bpd in 2024. U.S. producers this year have had to navigate President Donald Trump’s fluctuating tariffs, which have caused economic uncertainty, rising supply quotas from OPEC+, and ongoing conflicts in the Middle East and Ukraine.
Distillate inventory decline
The EIA stated that lower crude prices are anticipated to reduce retail prices for petroleum products, forecasting that retail gasoline prices in the U.S. will average less than $2.90 per gallon next year, approximately 20 cents per gallon lower than this year.
In addition, U.S. distillate fuel inventories are expected to conclude 2025 at the lowest end-of-year level since 2000, as they are projected to decline by 14 percent throughout the year, attributed to rising exports and demand, according to the EIA. Diminished U.S. refinery capacity and sustained strong export demand will contribute to lower inventory levels, with distillate inventories remaining relatively stable in 2026, the agency noted.
U.S. oil demand is forecasted to rise to 20.4 million bpd in 2025, consistent with previous predictions, according to the EIA. In 2026, oil demand is expected to increase to 20.5 million bpd, compared to an earlier estimate of 20.4 million bpd.
Cautious producer behavior
Additional context based on the latest EIA reports and industry analysis reveals further nuances about the U.S. oil market outlook. The EIA projects that the near-record production levels in late 2025 will be fueled by ongoing improvements in domestic well productivity, but drilling activity throughout 2025 has slowed due to oil price declines, signaling cautious producer behavior.
The U.S. rig count has notably dropped compared to previous years, which underscores the industry’s anticipation of lower prices and tighter margins ahead. The EIA forecasts Brent crude prices will dip below $60 per barrel for most of 2026, with some months potentially approaching $50 per barrel, mostly pressured by accelerated output from OPEC+ countries and broader global supply growth surpassing demand. This brings concerns about inventory build-ups internationally, pushing prices down and impacting U.S. producers’ willingness to maintain or increase output. Moreover, U.S. natural gas markets reflect a similar trend, with the Henry Hub price forecast slightly lowered in the short term due to higher storage levels but expected to rebound by 2026 amid production declines and increasing LNG exports.
Geopolitical risks continue to inject uncertainty into supply forecasts, as tensions in the Middle East and Ukraine could disrupt supply chains or trigger sanctions impacting crude markets. The EIA’s projections also account for potential shifts in trade policies and economic factors that might alter oil demand growth in the United States and globally. Retail fuel prices are expected to benefit consumers with declines alongside crude, but refiners face challenges as reduced capacity and stronger export demand tighten product inventories further, especially for distillate fuels, which are essential for heating and transportation.
