Forecast overview

• Global oil prices. The Brent crude oil price averaged $67 per barrel (b) in January, the highest since September 2025, as weather-related events disrupted the global crude oil supply and escalating tensions with Iran put upward pressure on prices. Despite these short-term events, we expect oil prices will decline in 2026, as global oil production exceeds global oil demand, causing oil inventories to rise. Global inventories continue increasing into 2027. We forecast the Brent crude oil price will average $58 per barrel (b) in 2026 and $53/b in 2027.

• Natural gas prices. Natural gas prices rose sharply in January. The Henry Hub spot price averaged $7.72 per million British thermal units (MMBtu), up 81% from December, in response to increased heating demand, reduced production, and large inventory withdrawals as Winter Storm Fern blanketed a large portion of the United States. We now expect that the United States will finish the withdrawal season at the end of March with less than 1.9 trillion cubic feet of natural gas in storage, 8% less than previously forecast. As a result, we raised our Henry Hub spot price forecast in February and March by an average of almost 40% from the January STEO. We expect the price increases will moderate as drilling activity drives increases in natural gas production later in the forecast period. Our forecast now assumes the Henry Hub spot price will average about $4.30/MMBtu this year and almost $4.40/MMBtu in 2027.

• Natural gas production. Frigid weather conditions across the United States led to a 3% drop in U.S. natural gas production from December to January. We expect the production drop was temporary, with almost all of the production back online in February. By the second half of 2026 (2H26), we expect production to ramp up as new pipeline capacity comes online in the Permian and producers increase drilling activity in response to higher prices in 1H26. Overall, U.S. dry natural gas production in our forecast grows by 2% in 2026 and by 1% in 2027.

• Coal consumption. We raised our forecast of total U.S. coal consumption as the U.S. coal fleet increased generation to meet peak demand during recent cold weather. In January, power plants in the United States used 43 million short tons of coal, 10% more than estimated in our January STEO. We expect higher coal use to persist through 1H26 as result of higher natural gas prices over that period in this month’s forecast. Although we raised our forecast for coal consumption, we still expect the U.S. electric power sector will use about 7% less coal this year than it did in 2025.

• Electricity. Higher electricity demand in our forecast is driven by both increasing economic activity and data center growth concentrated in Texas and the mid-Atlantic regions. However, increases in electricity use in our forecast are becoming more geographically broad. This month we increased our outlook for electricity consumption in both the Central and Midwest regions because of raised expectations for data center expansion in those areas. We expect that the growing electricity demand will be met mainly through increased solar electricity generation. We expect a 17% increase in solar generation in 2026 and an additional 23% increase in 2027, and wind generation increases by 6% and 7%, respectively, over those years.

• We lowered our forecast for the Mont Belvieu propane spot price, which we now expect will average 58 cents per gallon (gal) this year and 64 cents/gal in 2027. Those forecast prices are down by 10 cents/gal and 13 cents/gal, respectively from last month’s outlook. The lower price forecast reflects our higher natural gas production forecast, which results in more propane production as well. With higher propane production we expect that propane stocks will be higher throughout the forecast period.

• We completed STEO modeling and analysis for this report on February 5, 2026, and therefore this month’s STEO report does not include the most recent updates to Petroleum Supply Monthly and Natural Gas Monthly that were published on February 6, 2026.

You can find more information in the detailed table of forecast changes.