EIA May outlook highlights Strait of Hormuz disruption, oil price volatility, and rising energy costs through 2027.
Disruptions to Middle Eastern oil flows continue to shape global energy markets, according to the U.S. Energy Information Administration’s May Short‑Term Energy Outlook. The report outlines ongoing supply constraints, rising crude oil prices, and longer‑term impacts on fuel, propane, electricity, and natural gas markets that remain important to agricultural producers.
EIA Administrator Tristan Abbey said uncertainty around the timing of resumed oil flows through the Strait of Hormuz plays a central role in the agency’s forecast. The pace at which Middle Eastern producers are able to restore output will influence oil prices through the remainder of the year.
Middle East Oil Production Remains Disrupted
An estimated 10.5 million barrels per day of crude oil production from Iraq, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, and Bahrain was shut in last month. The EIA forecast assumes the Strait of Hormuz will remain effectively closed through late May, followed by a gradual resumption of traffic in June. Shipments are expected to return to pre‑conflict levels later in the year, although risks remain.
Impacting market shifts, the United Arab Emirates officially left OPEC on May 1, 2026. As a result, UAE production figures are no longer included in OPEC totals within EIA historical data or forecasts, marking a structural change in how global oil supply is tracked.
Crude Oil Prices Remain Volatile
Reduced global oil supplies pushed Brent crude oil spot prices sharply higher in April. Prices peaked at $138 per barrel on April 7 and averaged $117 per barrel for the month.
Looking ahead, EIA expects global oil inventories to fall by an average of 8.5 million barrels per day during the second quarter of 2026. Inventory tightness is projected to keep Brent crude prices near $106 per barrel in May and June, supporting elevated input costs across transportation and production‑intensive sectors, including agriculture.
Fuel Prices Remain a Key Watch Point for Farmers
Retail fuel costs remain a critical concern for producers managing planting, harvest, and transportation expenses. EIA forecasts retail gasoline prices to average $3.88 per gallon in 2026 and $3.62 per gallon in 2027. Diesel prices are expected to follow similar trends, reflecting sustained pressure from higher crude oil prices.
While near‑term volatility remains likely, EIA suggests some moderation in fuel costs as global oil shipments normalize later in the forecast period.
Propane Supplies Strengthen Despite Global Tensions
In contrast to oil markets, U.S. propane supplies remain well supported. Propane inventories reached record highs in 2025 and are expected to remain above historical averages through 2026 as supply growth continues to exceed demand.
Propane exports from the United States are forecast to rise through 2027, driven partly by increased demand from Asian buyers seeking alternatives to Middle Eastern supply. For North American agriculture, strong inventories could help limit propane price spikes during the next grain drying and heating seasons.
Natural Gas Production and LNG Capacity Expand
U.S. marketed natural gas production averaged 120.2 billion cubic feet per day in the first quarter of 2026, up four percent from the same period last year. Production is expected to continue growing through 2027, supported in part by associated gas output linked to elevated crude oil prices.
Liquefied natural gas export capacity also increased in April, expanding by approximately 0.9 billion cubic feet per day. Higher export capacity may tighten domestic balances at times, but expanding production is expected to help offset demand growth.
Rising Electricity Demand Adds Pressure
Electricity consumption in the United States is forecast to grow by 3.1 percent in 2027. Growth is being driven primarily by commercial demand, which is expected to surpass residential electricity consumption for the first time on record. Industrial electricity use is also increasing, although at a slower pace.
Residential electricity prices are forecast to rise by five percent in 2026 and continue increasing at a more moderate rate in 2027. The most significant price increases are expected along the U.S. East Coast.
What This Means for Agriculture
Energy costs remain a foundational input across farming operations, from fuel and fertilizer production to grain drying, irrigation, and transportation. While propane supplies appear favorable, continued crude oil volatility and rising electricity prices underscore the importance of energy planning and cost management in the years ahead.
EIA’s outlook suggests that global energy markets will remain sensitive to geopolitical risks, making energy price trends a key factor for producers as they navigate input costs and operational planning through 2026 and beyond.
Photo Credit: EIA