The first half of 2025 is expected to bring supply constraints to global oil markets, leading to rising prices. Production declines in Iran and Venezuela are tightening supply, pushing Brent crude prices upward. According to the latest Short-Term Energy Outlook (STEO) from the U.S. Energy Information Administration (EIA), Brent crude is projected to climb from $70 per barrel to $75 per barrel by the third quarter of 2025.
However, this upward trend may be short-lived. By late 2025, oil inventories are expected to increase as OPEC+ relaxes its production cuts and non-OPEC countries boost output. As a result, the EIA predicts that Brent crude prices will decline, averaging $68 per barrel in 2026.
U.S. Oil Production on the Rise
In the United States, oil production is set to grow. The EIA forecasts production to reach 13.6 million barrels per day (bpd) in 2025 and 13.8 million bpd in 2026, an increase from the estimated 13.2 million bpd in 2024.
Natural Gas Demand Increases, Storage Levels Decline
The natural gas market is also experiencing significant changes. A colder-than-expected start to the year has driven up demand, leading to increased withdrawals from storage. The EIA expects storage levels to fall below 1.7 trillion cubic feet by the end of March—10% below the five-year average.
Lower storage levels are contributing to rising prices. The Henry Hub spot price forecast has been revised upward to $4.20 per million British thermal units (MMBtu) for 2025, reflecting an 11% increase from the previous month’s projection. A major driver of demand is the U.S. power sector, which is expected to consume more than 36 billion cubic feet of natural gas per day in both 2025 and 2026.
Electricity Demand Surges, Led by Data Centers
Electricity consumption is on the rise, with a projected 3% increase in 2025. The higher demand is driven by residential heating needs and the expanding presence of data centers. Increased computing power requirements are fueling higher electricity usage, leading to greater reliance on natural gas-fired power generation.
Tariff Uncertainty Adds to Market Volatility
Trade tensions are introducing additional uncertainty into the energy market outlook. New U.S. tariffs on Chinese imports, along with China’s retaliatory measures targeting energy products, have been factored into the EIA’s forecast. However, potential policy shifts—such as postponed tariffs on Canada and Mexico—remain unpredictable, adding volatility to market conditions.
In summary, the EIA forecasts a tightening of oil markets in early 2025, followed by a price drop as supply increases. Natural gas prices are expected to rise due to lower storage levels and growing demand. Electricity consumption is climbing, largely driven by data center expansion. Meanwhile, evolving trade policies and tariffs continue to inject uncertainty into the energy sector.
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