EIA Slashes Oil Price Forecasts; AI Drives Record US Power Demand

The U.S. EIA has recently delivered a sharp downward revision to its crude oil price forecasts, as easing Middle East tensions are set to normalize energy shipping flows and erase geopolitical supply premiums. Meanwhile, booming AI infrastructure is driving U.S. power demand to successive record highs over the next two years.

Oil Market: Supply Rebound Crushes Geopolitical Risk Premium

EIA cut its 2026 Brent forecast from $95/bbl to $82/bbl (-14%) and 2027 outlook from $79/bbl down to $65/bbl (-18%). WTI estimates were also slashed by roughly 14% and 18% for the two years respectively.

Global oil output projections were lifted substantially, with production poised to outpace demand growth through 2027. OECD commercial crude inventories will rebuild markedly, putting sustained downside pressure on oil benchmarks.

- Global supply to hit 75.7 million b/d in 2026 and 81.4 million b/d in 2027, both upgraded month-on-month

- Global demand edges slightly lower across both years, widening the supply surplus

- U.S. crude output to hit a fresh high of 13.8 million b/d in 2026, before a mild pullback to 14.0 million b/d in 2027 amid slower shale investment on cheaper oil

Retail gasoline will follow crude lower, averaging $3.64/gallon in 2026 and under $3.10/gallon in 2027. Temporary tight fuel inventories will only offer minor near-term support to pump prices.

U.S. Power & Natural Gas: AI Sparks Unprecedented Commercial Electricity Use

U.S. power consumption is on track to hit record levels in both 2026 and 2027, primarily driven by rapid expansion of AI data centers.

Commercial power demand will surpass residential usage for the first time ever in 2026, climbing to 1.55 trillion kWh versus residential consumption of 1.508 trillion kWh. Total national electricity demand will rise from 4.195 trillion kWh in 2025 to 4.399 trillion kWh by 2027.

Growing power burn underpins steady natural gas demand for power generation. Record domestic gas output keeps Henry Hub prices subdued, averaging near $3.70/MMBtu in 2026 and below $3.50/MMBtu in 2027. U.S. LNG export volumes are revised higher for this year as new export facilities ramp up operations.

Key Data Recap (July vs June STEO)

1. Brent spot average: 2026 $82 (prev $95); 2027 $65 (prev $79)

2. OECD commercial inventories upgraded 15% for 2026 and 17% for 2027

3. Global oil production raised 3.5% for 2026 on restored Hormuz shipments

4. U.S. commercial electricity demand to outstrip residential load in 2026 due to AI buildout

The next monthly Short-Term Energy Outlook will be published on August 11.