Expectations and realities: 12 predictions for the year ahead in energy

As we head into another year and gaze into our crystal ball, geopolitics, market volatility and policy repercussions will be key drivers shaping the global energy industry. As the energy transition advances, albeit at a slower pace than in some previous years, opportunities will unfold alongside increasing complexity, including the role of new energies in meeting growing power demand from data centers.

Concurrently, balancing affordability, sustainability and energy security will remain a persistent challenge, with fossil fuels expected to continue playing a significant role in the year ahead. OPEC+ policy, exploration results and mergers and acquisitions (M&A) will all set the tone for supply growth and define market conditions in oil and gas next year.

Rystad Energy advises governments, organizations and companies across the full energy spectrum, combining data-driven analysis with on-the-ground expertise to identify and explain the trends set to shape the industry in 2026.

A year of upstream energy abundance lies in store in 2026, but with potential bottlenecks downstream. We can thus expect to see depressed primary energy prices, albeit with potential for healthy margins in some energy carrier and storage segments. However, the deeper primary energy prices fall in 2026, the more they will rebound in 2027 and 2028. The coming year could therefore be a good one for acquisitions and greenfield project contracting – particularly for players with deep pockets. It will also be a year in which the new hybrid energy reality – with a mix of green and fossil energy sources in all sectors – will be more visible than ever, with volatile price fluctuations in the power market and steady growth of electrification by end-users. Given the recent headwinds for green policies, decisions will be driven more by fundamental economics than policies.

According to our demand estimates, primary energy consumption will grow by around 2,500 terawatt-hours (TWh), of which 700 TWh is energy losses and 250 TWh is energy molecules used for materials. Thus, the growth in consumption of useful energy will be around 1,550 TWh, of which 450 TWh will be carried as molecules, 900 TWh as electrons and 200 TWh as heat. Of the growth in molecules used for energy, about 60% is likely to be gas, with oil trailing at 20% (as most of the oil growth is for materials, not energy) and with biomass poised to match that 20% level. Of electrons, 100% of the growth is shaping up to be renewables, while 200 TWh of growth in gas-based generation will be balanced by a similar decline in coal and oil-based generation.

Turning to supply-side estimates, we expect oil to experience the largest oversupply, as an additional 3.2 million barrels per day (bpd) could come into the market if OPEC+ opts to unwind its voluntary production cuts. Even with China rapidly building its strategic crude inventories, the market will still be oversupplied and OPEC+ will need to choose between extending cuts or accepting even weaker oil prices. Meanwhile, key OPEC+ countries have recently expanded their refinery capacity, targeting profitable new revenue streams. We expect to see healthy refinery margins, supported by the vast level of capacity that has been shut in across Europe and the US. These OPEC+ countries could therefore still achieve satisfactory returns, even amid lower oil prices. 

 Gas markets are also oversupplied, as an abundance of new liquefied natural gas (LNG) capacity is being brought on stream. However, with increased coal-to-gas switching due to low gas prices, additional volumes can be absorbed by the market. In power supply, the steep growth of new wind and solar capacity will further increase mid-day oversupply levels, especially during periods of lower seasonal demand. To fix this, more storage is needed and battery energy storage systems are the fastest-growing sector in the energy market. Storage owners and innovators could emerge as big winners in a sector suffering from periodically low or negative power prices.

1.      Global refinery utilization surges and supports strong margins in 2026

Global refinery capacity utilization is expected to rise despite weak growth in oil product demand in 2026. Capacity growth is projected at under 800,000 bpd, while product demand growth is expected to average nearly 900,000 bpd. While this appears balanced, refinery capacity growth has lagged oil product demand growth since 2023, with demand outpacing capacity by an average of 400,000 bpd each year. This is compounded in 2026 by further capacity rationalization in the US and Europe, alongside slowing investment in Asia and the Middle East.

High utilization rates will push refined product crack spreads, the difference between crude oil and product prices, to elevated levels, supporting strong refinery margins globally. Europe faces the most acute diesel supply risk, while gasoline supply along the US East Coast may also come under pressure due to reliance on incremental supply from Europe. Very high diesel crack spreads in Europe and the US are likely to persist through most of 2026, supporting stronger diesel margins in Asia and the Middle East as trade flows adjust. Gasoline margins will also find support as refiners balance gasoline and diesel supply.

2.      US shale output will remain resilient even amid low prices

In 2025, oil prices structurally degraded, causing US shale oil producers to dramatically reduce rig counts. Nonetheless, production has defied expectations as exploration and production (E&P) companies have utilized longer lateral well designs and improved drilling efficiency.

With prices teetering near the key corporate breakeven level of $60per barrel of West Texas Intermediate (WTI) crude heading into 2026, we expect output to prove resilient again. Public E&Ps will be keen to avoid an outright decline in production, as this can damage valuations and deteriorate unit costs. Instead, operators will defend maintenance production, potentially lowering payout ratios, with hopes of gaining operational and overhead synergies from M&A activity to offset full-cycle costs.

3.      A pivotal year for the global energy supply chain

The global energy supply chain will undergo major changes in 2026. Early-year softness in oilfield services is expected to give way to a gradually improving second half of the year as capacity tightness and pricing momentum will begin to surface in deepwater, subsea and select international markets, while North American land activity remains muted.

 Subsea pricing is expected to remain resilient, supported by strong backlogs and integrated project offerings, with a clearer upside building into late 2026 and 2027. Onshore international pricing trends remain generally mixed, with pockets of constructive activity. Across offshore subsea vessels, deepwater rigs, and floating production, storage and offloading (FPSO) vessel fabrication, capacity constraints begin to build through 2026 and intensify in 2027 as a new wave of deepwater and LNG-linked final investment decisions (FID) come to fruition.

 In the broader energy-infrastructure supply chain, constraints persist through 2026: the gas-turbine sector faces long lead times and elevated equipment costs as manufacturing capacity lags demand and transformer supply remains tight despite planned capacity expansions.

4.      A transition year for the global LNG market

Global LNG supply is set to increase by around 30 million tonnes in 2026, driven primarily by project ramp-ups in North America. Asia-led buyers are expected to absorb a large portion of this additional volume, but market fundamentals will still need to navigate project commissioning risks, weather-driven demand swings, price volatility, tightening environmental regulations and ongoing geopolitical disruptions.

 The 2026 gas market watchlist will inevitably feature the US – which has imposed tariffs on a wide range of imports while pursuing a larger share of future LNG trade – Russia, still at odds with Ukraine and under extensive US and European sanctions and China, whose LNG demand unexpectedly softened in 2025 as it prepares its 15th Five-Year Plan for 2026–2030. Next year is shaping up as a transition year toward looser market conditions across the next five to six years.

5.      Further crude stockpiling in China

Driven by rapid expansion of storage capacity, China is expected to significantly increase its strategic crude oil inventories in 2026.  This move underscores the growing priority of energy security amid rising geopolitical tensions, even as economic and seasonal factors continue to influence stockpile levels.

With approximately 70% of its crude supply reliant on imports, China's import dependency is a primary concern for its more than 100 refineries. This high reliance also positions China as a crucial swing buyer in the global market. When a supply surplus drives prices lower, China's stockpiling activity is poised to establish a price floor for the global market.

In the short term, China will remain heavily dependent on imported crude. While domestic demand for gasoline and diesel is declining due to the rapid adoption of electric vehicles (EV) and LNG trucks, total oil consumption remains resilient. This plateau is supported by rising demand for jet fuel and petrochemical feedstocks.

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6.      Stronger economy, softer energy, uncertain geopolitics

In 2026, the macroeconomic outlook is increasingly constructive: the artificial intelligence (AI) investment boom is gaining momentum, the US midterm cycle limits fiscal tightening and major central banks are easing into an environment where global inflation stays surprisingly low. Tariff measures are still largely confined to the US, with limited retaliation so far, reducing the risk of a broader trade shock.

Geopolitics, however, injects significant volatility, with the war in Ukraine, an unstable ceasefire in the Middle East and the potential for a flare-up in Venezuela keeping supply chains and energy security exposed to sudden disruptions. The European Union, Japan and other energy-importing markets will need to navigate this harsh geopolitical landscape, but their economies should benefit from lower energy prices after years of cost pressures. China is set to double down on its energy-transition commitments, reinforcing its dominance across key clean-technology supply chains.

 For energy commodities, the balance points to downward pressure on oil prices from a broad-based rise in global supply and a slowdown in demand growth driven primarily by the EV boom in China, while a potential easing of Russian sanctions adds further downside risk to both oil and gas.

7.     Uncertainty in the global upstream sector

The upstream sector could face headwinds in 2026. Global oil markets could see oversupply topping 3 million bpd by the end of next year, even if China aggressively fills its strategic crude storage. This structural imbalance will likely impose a hard ceiling on prices, making $70+ oil unlikely.

US independents have shifted decisively toward maintenance mode. While the shareholder distributions will shrink to allow for maintenance capital, major production cuts seem unlikely while WTI holds above $50 per barrel. Moreover, the industry continues to surprise with technological advancements: four-mile lateral wells are unlocking previously marginal Tier 3-4 acreage across core basins, improving breakeven prices by up to $10 to $12 per barrel.

Looking further ahead, 2026 may represent a strategic turning point for global exploration. While the near-term surplus is undeniable, longer-term concerns loom large. Meeting a hypothetical demand scenario of more than 100 million bpd through mid-century requires replenishing reserves now. Infrastructure-led exploration (ILX) is accelerating across mature basins, while Southeast Asia, West Africa and Latin America are cementing their positions as premier exploration frontiers.

8.      Data centers keep growing, especially in the Americas

The US and Americas data center market is rapidly growing, mainly driven by demand from AI and other high-performance computing services.

Among the top 15 countries where we expect the most growth in data center capacity, four are in the Americas. The US – the single largest country globally accounting for more than 40% of the expected data center growth – is joined by Canada, Brazil and Mexico, all of which have sparked developers' interest.

This growth strains existing power market structures, as new data centers require substantial and reliable power, causing competition for utility capacity and interconnection delays. Next year will see extensive discussions about power cost and ‘time-to-power’, as developers face increasing power bottlenecks. The power sector may entertain on-site generation solutions, such as microgrids, gas turbines and battery energy storage systems.

9.      Delayed FIDs, sluggish energy transition signal a looming supply gap in Asia

Slow FIDs and a sluggish energy transition are creating a looming supply gap in Asia, driving a push to accelerate projects from front-end engineering and design (FEED) to FID as operators try to break the stop-start cycle.

Gas supply momentum is building, led by Malaysia, with Indonesia and Vietnam expected to follow, while Asian national oil companies (NOC) increase M&A to secure long-term growth and resource options.

Exploration results from energy majors are setting the tone for future investment, and carbon capture and storage (CCS) projects are gaining attention amid cooling investment appetite and slow policy progress.

10.      Increased calls for portfolio enhancements within frontier blocks

Exploration in 2026 is marked by sustained capital discipline, with global spending expected to hold steady at just over $60 billion, in line with 2025. This stability supports a continued preference for selective, high-quality opportunities as companies focus on long-term portfolio resilience and prepare to offset structural decline rates beyond 2030.

 The strategy centers targeted entry into new frontiers without accelerating short-term drilling programs. Drilling capital will remain concentrated in proven, high-value regions, although frontier basins are also expected to gain more traction. More than 60 offshore frontier wells are anticipated next year, primarily across Asia, Africa and South America. Oil-focused activity remains robust in Namibia, Brazil and the US Gulf of America, while gas-prone basins such as the East Mediterranean, Norway and Southeast Asia continue to underpin low-risk additions, particularly through ILX opportunities.

 Several countries are supporting this momentum by promoting earlier basin entry and structured technical evaluation, driving increased collaboration between international oil companies and NOCs in frontier and emerging basins. The overall outlook for 2026 points to quality-led portfolio expansion, with stable activity levels but a clear strategic emphasis on securing future options and strengthening reserves through future exploration.

11.      M&A driven by $150 billion of upstream opportunities

Global upstream M&A activity is expected to continue the ongoing slowdown in 2026, with nearly $150 billion-worth of opportunities currently on the market. This would mark the second consecutive year of reduced activity following two exceptional years in 2023 and 2024, when deal value exceeded $200 billion, driven largely by a consolidation wave in US shale.

We expect North America (particularly US shale) to continue dominating the global M&A landscape. The US shale sector has entered a new phase of consolidation centered on ‘mergers of equals’ among small to mid-cap E&Ps. Companies such as Permian Resources, Matador Resources, HighPeak and Chord Energy could be among the next to act in this ongoing consolidation cycle.

While North America remains the primary engine of deal flow, appetite for international upstream opportunities (especially gas and LNG) persists. In 2026, several themes could shape the international M&A narrative, including the outcome of Lukoil’s divestment process for its international assets, Santos’ efforts to execute a corporate sale, Asian NOCs and E&Ps’ international expansion plans, and rising interest in Argentina’s Vaca Muerta shale.

12.      Renewable energy capacity growth set to slow in 2026

Next year will be pivotal for the power sector, as a significant slowdown in new renewable capacity is on the horizon for the first time since the early 2000s. Additions from renewable energy sources like solar PV, wind and hydro are expected to total 650 gigawatts (GW) next year, representing a decline of 7% from 2025.

This slowdown will be mostly due to less solar capacity being deployed in China as a result of policy changes that removed guaranteed pricing for new projects, as well as some headwinds in the US.

However, as demand growth is forecast to remain strong, investment decisions in new generation capacity should be seen across regions but with a more diverse portfolio that will also include gas and nuclear power.

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Laura R. Skaug
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About Rystad Energy 

Rystad Energy is a leading global independent research and business intelligence company dedicated to helping clients navigate the future of energy. By providing high-quality data and thought leadership, our international team empowers businesses, governments and organizations to make well-informed decisions.

Our extensive portfolio of products and solutions covers all aspects of global energy fundamentals, spanning every corner of the oil and gas industry, renewables, clean technologies, supply chain and power markets. Headquartered in Oslo, Norway, with an expansive global network, our data, analysis, consulting and education services provide clients a competitive edge in the market. 

For more information, visit www.rystadenergy.com.