The U.S. Energy Information Administration (EIA) has updated its Short-Term Energy Outlook to reflect a stronger trajectory for domestic crude production in 2027 following a price spike tied to supply disruptions in the Middle East.
In the outlook released Tuesday, the agency now expects U.S. crude output to rise by 220,000 barrels per day in 2027, reaching 13.83 million barrels a day. That projection is about 500,000 barrels higher than the agency's February forecast, which had suggested production would peak this year and then decline in 2027.
The EIA emphasized the lagged nature of production responses to price changes.
"Because changes in oil prices take time to affect production - moving from investment decisions to rig deployment to well completion and first oil - the effect of higher prices in our forecast is more pronounced in 2027 than in 2026,"the agency said.
Recent disruptions that prompted the price response included a wave of supply shut-ins concentrated in Iraq, with smaller volumes affected in Kuwait, the United Arab Emirates and Saudi Arabia. The EIA estimated that shut-in production would likely peak in early April, and it said output is expected to recover gradually as flows through the Strait of Hormuz resume.
Those disruptions followed a sharp escalation of military actions in the region. The U.S. and Israel began strikes on Iran late last month, which provoked widespread retaliatory attacks from Tehran and led to an effective closure of the Strait of Hormuz - a strategic waterway that normally carries about a fifth of global oil flows. The agency noted that production cuts across the region have been amplified by storage capacity filling up.
Market reaction to the disruptions has been pronounced. U.S. crude prices surged this week to nearly $120 a barrel before easing back to trade near $84 a barrel. The price rally has translated into higher costs at the pump: retail gasoline prices in the U.S. have reached their highest levels since July 2024.
Reflecting that move, the EIA raised its forecast for U.S. retail gasoline prices to an average of $3.34 a gallon in 2026, an increase of 43 cents from its prior projection.
This update from the EIA underscores the time lag between price signals and production responses in the U.S. oil sector, and it highlights how regional supply interruptions and logistics constraints can quickly affect global flows and domestic fuel prices.