Investing.com -- The US increased its forecast for domestic oil production in 2027 following a recent surge in prices caused by supply disruptions from key Middle East countries.

US crude output is now expected to grow by 220,000 barrels a day in 2027 to 13.83 million barrels a day, according to the Energy Information Administration's Short-Term Energy Outlook released Tuesday.

The new forecast represents an increase of about 500,000 barrels from the agency's previous projection made in February. That report showed US production was on course to peak this year and then decline in 2027.

"Because changes in oil prices take time to affect production—moving from investment decisions to rig deployment to well completion and first oil—the effect of higher prices in our forecast is more pronounced in 2027 than in 2026," the EIA said in its latest report.

Shut-in oil production will likely peak in early April, mostly in Iraq with smaller volumes in Kuwait, the United Arab Emirates, and Saudi Arabia, the EIA estimated. The agency added that output will gradually recover as flows through the Strait resume.

The US and Israel began strikes on Iran late last month, triggering widespread retaliatory attacks from Tehran and the effective closure of the Strait of Hormuz, a critical waterway that normally handles a fifth of global oil flows. Production cuts are rippling across the region as storage capacity fills up.

US oil prices surged this week to nearly $120 a barrel before easing to trade near $84 a barrel. The rally has already pulled US retail gasoline prices to the highest levels since July 2024. The EIA raised its forecast for US retail gasoline prices to an average of $3.34 a gallon in 2026, up by 43 cents from its last projection.