EIA Forecasts Rising Inventories and Lower Oil Prices Through 2026

The U.S. Energy Information Administration's (EIA) latest Short-Term Energy Outlook (STEO), released November 12, paints a clear picture for the months ahead: global oil inventories are on the rise, and that means crude prices are expected to trend lower through 2026.

According to the report, Brent crude prices are projected to average $54 per barrel in the first quarter of 2026 and $55/b for the year, a significant decline from the expected average of $69/b in 2025 and $81/b in 2024. While the agency still expects prices to soften, this new outlook is $3/b higher than last month's forecast, primarily due to China's continued strategic oil purchases and updated assumptions regarding sanctions on Russia, which could constrain output.

In October, Brent averaged $65/b, down $3/b from September and $15/b below January levels. The decline reflected an ample global supply, led by steady increases from OPEC+, Brazil, Guyana, Canada, and the United States, which outweighed uncertainty from sanctions and seasonal demand slowdowns.

Global Supply Growth and Inventory Builds

The EIA expects global oil inventories to continue climbing, with stocks increasing by an average of 2.2 million barrels per day (b/d) in 2026, up from 1.8 million b/d in 2025. The sharpest builds are expected in late 2025 and early 2026, averaging around 2.7 million b/d.

Part of that growth comes from OPEC+ production increases. The group began raising production targets in April 2025 and plans to maintain those levels through December. However, it announced a pause in new increases through March 2026 due to weaker seasonal demand. Even with that pause, the EIA forecasts OPEC+ output to average about 1.3 million b/d below its targets next year as the market becomes saturated.

Another contributor is China's ongoing strategic stockpiling, which has quietly absorbed a significant portion of the global supply. The EIA estimates that China added approximately 0.8 million b/d to its reserves between January and September 2025, although exact data are uncertain.

On the production side, Brazil, the U.S., Guyana, and Canada are expected to lead output growth. Combined, these countries account for roughly 75% of global production growth in 2025 (1.5 million b/d) and 67% of 2026's increase (0.8 million b/d).

Overall, global liquids production is projected to rise by 2.8 million b/d in 2025 and another 1.4 million b/d in 2026, while consumption increases more modestly, by 1.0 million b/d in 2025 and 1.1 million b/d in 2026. That imbalance sets the stage for sustained inventory builds and continued price pressure.

U.S. Gasoline and Diesel Outlook

The EIA projects that retail fuel prices will continue to decline alongside lower crude prices.

• Gasoline: The average U.S. retail gasoline price is expected to remain near $3.10 per gallon (gal) in 2025, about 6% lower than 2024, before falling to below $3.00/gal in 026, a 10% decline from 2024 levels. That would mark the lowest annual average gasoline price since 2020.
• Diesel: Retail diesel prices are expected to average $3.70/gal in 2025 and fall to $3.50/gal in 2026, roughly 7% lower than 2024.

While falling crude prices drive much of this decrease, refiners' margins are expected to rise, which will soften the relief for consumers. The EIA expects diesel crack spreads will climb from $0.52/gal in 2024 to $0.69/gal in 2025 and $0.84/gal in 2026, while gasoline spreads are expected to follow a similar path.

The crude component of retail prices continues to shrink. Crude accounts for about 53% of gasoline prices in 2025 and 44% in 2026, and 45% and 37% of diesel prices for those same years. If realized, 2026 would see the lowest crude contribution to diesel prices since 1998.

Regionally, all U.S. markets are forecast to average below $3.00/gal for gasoline in 2026 except the West Coast, where the average could hit $4.10/gal due to refinery closures at Phillips 66's Wilmington refinery and Valero's Benicia facility.