US oil production to rise from a record 13.6 million barrels per day in 2025 to 13.8 million barrels per day in 2026

Oil prices rose more than 4% at the close of last week's trading, hitting their highest level in over a month, after the United States and Iran escalated their attacks in the Arabian Gulf, amid threats of a potential closure of the Red Sea, in addition to restrictions on navigation through the Strait of Hormuz.

Brent crude futures closed up $3.87, or 4.59%, at $88.10 a barrel, while US West Texas Intermediate crude futures rose $3.54, or 4.48%, to $82.49. Both benchmarks hit their highest levels since mid-June.

Over the week, both benchmarks posted gains of about 16%, with Brent marking its third consecutive weekly gain, while WTI posted its second weekly gain.

Fighting between the two countries intensified on Friday, with the US bombing bridges and an airport in Iran, while Tehran targeted a power and desalination plant in Kuwait. Iran announced further strikes on US facilities in the Middle East, including the first direct attack in Syria, after six consecutive nights of US raids on Iranian military installations.

The collapse of the ceasefire between the US and Iran led to a sharp decline in oil flows through the Strait, with Iran targeting ships transiting it. Before the Iran war, about 20% of global oil supply passed through the Strait of Hormuz.

Tamas Varga, analyst at PVM Oil, wrote in a note: 'Given that Saudi Arabia has diverted a significant portion of its exports to the Yanbu terminal via the East-West pipeline to avoid the Strait of Hormuz, any such development is a real threat.'

Saudi Arabia has diverted more than 70% of its normal daily crude exports to the Yanbu port on the Red Sea since the start of the war. Shipments from Yanbu averaged 4 million barrels per day in recent weeks, up from about 973,000 barrels per day in the same period last year.

Qatar's Defense Ministry announced that its armed forces foiled an Iranian missile attack on Friday dawn, while the Interior Ministry reported a child was injured by shrapnel from interceptions. In another conflict zone, the Ukrainian army said it bombed a Russian oil refinery in the Yaroslavl region on Thursday.

Baker Hughes, an energy services firm, said US energy companies added new drilling rigs this week for the fifth consecutive week, the first time since early June, lifting the total rig count to its highest level since April 2025, according to its closely watched report released Friday.

The total rig count, an early indicator of future output, rose by seven to 588 in the week ended July 17. Baker Hughes said the increase this week lifted the total rig count by 44 rigs, or 8%, compared with the same period last year.

Baker Hughes reported that the oil rig count rose by seven to 452 this week, the highest since May 2025, while the gas rig count held steady at 126, and miscellaneous rigs remained at 10.

In Oklahoma, the rig count rose by two to 50, the highest since June 2025. In Texas, the nation's largest oil and gas producer, the rig count rose by two to 274, the highest since April 2025.

Oil and gas rig counts fell by 7% in 2025, 5% in 2024, and 20% in 2023, as low US oil prices pushed energy companies to focus more on boosting shareholder returns and paying down debt rather than increasing production.

Spot prices for US West Texas Intermediate crude are expected to rise in 2026 due to supply disruptions from the Iran war, after declining in 2023, 2024, and 2025. The US Energy Information Administration expects US crude oil production to rise from a record 13.6 million barrels per day in 2025 to 13.8 million barrels per day in 2026.

For natural gas, the US Energy Information Administration expects a sharp jump in production from a record 107.7 billion cubic feet per day in 2025 to 111.3 billion cubic feet per day in 2026, as demand for fuel to generate electricity for data centers that consume huge amounts of power grows, and for export as liquefied natural gas.