IMF Forecasts Oil Prices to Drop to $87 per Barrel in 2027

IMF Forecasts Oil Prices to Drop to $87 per Barrel in 2027

The International Monetary Fund (IMF) projects global oil prices will decline in 2027 after a sharp increase triggered by the war involving the United States, Israel and Iran, offering the prospect of some relief for fuel-importing economies such as Kenya.

The IMF estimates that the average price of a barrel of oil will reach $95.74 in 2026, equivalent to approximately KSh12,428.34 at the exchange rate provided. The price is projected to fall to $87.39 per barrel in 2027, or about KSh11,344.40.

Despite the expected decline, oil prices would remain significantly higher than pre-war levels, highlighting the continuing uncertainty facing global energy markets.

The forecast comes as governments, businesses and consumers contend with rising energy costs, which can increase transport expenses, production costs and the prices of essential goods.

IMF Projects Oil Prices to Ease in 2027

According to the IMF projections, the average oil price is expected to decrease by $8.35 per barrel between 2026 and 2027.

This represents a decline of approximately 8.7% from the projected 2026 average.

However, the expected reduction would not fully reverse the increase recorded since the conflict began on February 28, 2026.

Before the war, Brent crude oil was trading at around $70 per barrel, although daily prices fluctuated between approximately $66 and $72.

The projected 2027 average of $87.39 would therefore remain more than $17 above the pre-war benchmark.

Oil prices have risen by more than 70% this year, according to the figures provided, as conflict-related supply concerns disrupted global energy markets.

The IMF forecast suggests some easing in the medium term, although actual prices will depend on developments affecting production, transportation and international demand.

Global Oil Prices Fall After Trump’s Announcement

Global oil prices came under pressure on Tuesday, October 13, following reports that US President Donald Trump had announced an agreement for Russia to supply diesel to international markets.

The announcement was accompanied by a temporary easing of US sanctions on Russian fuel, raising expectations that additional supplies could help reduce pressure on global energy markets.

An increase in available fuel supplies could ease shortages and limit further price increases if shipments reach buyers and other supply conditions remain favourable.

However, the market outlook remains uncertain because of continuing security concerns in the Middle East.

Reports of attacks involving Iran-aligned Houthi forces near Riyadh and attacks on tankers around the Strait of Hormuz have heightened concerns about the security of critical energy routes.

The Strait of Hormuz is a major international shipping passage through which substantial volumes of the world’s oil supplies move. Any sustained disruption could affect deliveries and push prices higher.

What Lower Oil Prices Could Mean for Kenya

As a major importer of petroleum products, Kenya is exposed to changes in international oil prices. Higher crude and refined fuel costs can increase the cost of importing petrol, diesel and kerosene.

These changes can affect domestic fuel prices, although the final retail price also depends on exchange rates, taxes, transportation, refining costs and other charges.

If international oil prices decline and the Kenyan shilling remains relatively stable, the reduction could ease some pressure on fuel import costs.

Lower fuel costs could also help reduce transport and production expenses for businesses that depend on petroleum products.

However, the IMF’s forecast does not guarantee that Kenyan consumers will immediately pay less at petrol stations. Local prices depend on the costs and pricing decisions applicable during each review period.

Oil Market Outlook Remains Uncertain

The projected decline to $87.39 per barrel in 2027 offers a more moderate outlook than the expected 2026 average, but prices remain vulnerable to geopolitical developments.

The pace of any decline will depend on whether additional supplies reach the market, shipping routes remain accessible and conflict-related risks ease.

For Kenya and other fuel-importing countries, the key question is whether the anticipated reduction in global oil prices will translate into lower import costs and more affordable fuel.

For now, the IMF forecast points to possible relief in 2027, while continuing instability in global energy markets remains a major risk.

ALSO READ: Muthomi Njuki Succeeds Ahmed Abdullahi as Governors’ Council Chair

IMF Forecasts Oil Prices to Drop to $87 per Barrel in 2027