The first half of 2025 is shaping up to be a squeeze play for global oil markets. Supply is tightening thanks to ongoing production declines in Iran and Venezuela. The result? Brent crude prices are inching up from $70 per barrel to a newly forecasted $75/b by Q3, the EIA has said in its latest Short Term Energy Outlook released on Tuesday.

But don’t get too cozy with those numbers—by late 2025, oil inventories are expected to build, courtesy of OPEC+ unwinding its production cuts and non-OPEC countries pumping more. That means prices will slip back down, the EIA predicts, with Brent averaging $68/b in 2026.

In the United States specifically, the EIA sees oil production growing to 13.6 million bpd this year and 13.8 million bpd next year—that’s an increase from an estimated 13.2 million bpd in 2024.

Natural Gas: Demand’s Up, Storage is Down

On the natural gas front, a bitterly cold start to the year sent natural gas demand soaring. More heating meant bigger withdrawals from storage, which the EIA now expects to end March below 1.7 trillion cubic feet—10% below the five-year average. Less cushion in storage means prices are heading up, with the EIA’s Henry Hub spot price forecast at $4.20/MMBtu this year—a solid 11% jump from last month’s prediction.

And guess who’s eating up more gas? The U.S. power sector, which will be guzzling over 36 billion cubic feet per day in both 2025 and 2026.

Electricity: Data Centers Are the New Power Hogs

Electricity consumption is on the rise and predicted to land up 3% this year (which is slightly more than expected), thanks to residential heating demand and the ever-expanding footprint of data centers. More computing power means more electricity demand, and that means more natural gas-fired generation.

Trade Shenanigans & Tariff Uncertainty

Just to keep things interesting, the U.S. energy outlook now comes with a side of tariff drama. The new round of U.S. tariffs on China (and China’s retaliatory energy product tariffs) are factored into the forecast, but additional moves—like delayed tariffs on Canada and Mexico—are still a wild card. The bottom line? Expect some policy-driven volatility in energy markets.

So the EIA sees oil markets tightening, then loosening. Natural gas is getting pricier. Electricity demand is climbing, thanks to our digital addiction. And tariffs? They’re the wildcard that could shake things up.

By Julianne Geiger for Oilprice.com

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