A glimpse into energy in 2026, with Jarand Rystad

0:00 [Music] Noah Brener (Host): This is Let’s Talk Energy, your go-to podcast for smart energy insights. I’m your host, Noah Brener, and each week we bring you an inside look at the dynamics shaping global energy markets through in-depth conversations with our Rystad Energy experts and special guests. In today’s episode, we’re dusting off our crystal ball and gazing ahead to what we believe will be the biggest energy stories of 2026. How will companies and countries navigate oil, natural gas, and power markets that, on a macro level, are forecast to be significantly oversupplied through the year ahead? Could 2026 be a pivotal year for the energy transition despite worries about waning climate ambition globally? And will geopolitics inject even more unpredictability into an already tumultuous energy landscape? To help us figure out what the year ahead may have in store, I’m joined today from Oslo by Jarand Rystad, founder and CEO of Rystad Energy. Jarand, welcome to the program. Jarand Rystad: Thank you. Great to be here. Noah Brener: Let’s talk energy. We’re starting to see a wave of 2026 predictions about the energy market. Jarand, what’s your most contrarian prediction for 2026? What are you hearing that others say might happen that you don’t agree with? Jarand Rystad: We think there will be an abundance of energy. We see a lot of new oil coming in, a lot of new gas, and a lot of new power. Some people are more cautious and still see scarcity of energy supply, but we have the opposite view. Noah Brener: Let’s talk about Rystad’s numbers. Oil demand growth is about 800,000 barrels per day, less than 1% of global demand, with supply growth at about 3.2 million barrels per day, assuming OPEC unwinds cuts. Natural gas demand growth is about 45 million tons per annum, with supply growth around 60 million tons, split between LNG and pipeline gas. In power, demand growth is about 900 terawatt-hours, with supply growth around 1,100 terawatt-hours. I see the abundance, but many people don’t feel it. Politicians and the public are worried about affordability. Why doesn’t upstream abundance translate into lower prices for consumers? Jarand Rystad: Let’s start with the United States. Last year, spot power prices were around $30 per megawatt-hour. Today they’re around $42. That’s because of two new sources of gas demand in the US: data centers requiring gas for power production, and new LNG facilities. Henry Hub was down to $2 per MMBtu in some months last year; recently it’s up to around $4.2. 4:00 Jarand Rystad: Americans are used to very cheap gas prices, so they feel that increase, especially when using gas for heating, and because gas influences power prices. In Europe we see completely different prices—around $11 per MMBtu—and people are happy when it approaches $10. Next year we expect a further decline, maybe to around $9.5. For Europeans, and also for East Asia, these are attractive prices even if they’re still two to three times higher than in the US. Noah Brener: Have we done a good job solving the upstream part of the energy equation, but not the midstream and downstream part? Jarand Rystad: Yes. Upstream supply is rich, but there are bottlenecks downstream. On oil, refining can be a bottleneck. We have high diesel cracks and margins, which also influence gasoline margins. On power, we don’t have enough storage. With intermittent renewables, we get very volatile prices: we can have near-zero or even negative prices during the day, and quite high prices in the evening when the sun isn’t shining and wind is low. Storage bottlenecks drive prices up and down. On average, since 2022 we’ve seen prices trending down. In Europe, prices are linked to gas prices. In the UK and Italy we have the highest prices in Europe because they’re mostly linked to gas. In Spain and Germany, and partly France, which are more influenced by solar, we’ve seen very low prices, especially in spring due to oversupply of electrons. Next year there will be even more of that. Noah Brener: Let’s dive into oil. This has been the most discussed oil glut in history. At the same time we’ve seen OPEC+ shift strategy, and US shale players prioritize returns and capital discipline. The oversupply doesn’t even fit in global storage, so something has to give. Do you think OPEC or US shale balances the market—who cuts first, and how much? Jarand Rystad: US shale will likely be fairly flat at current levels. Our shale analysis has usually been very accurate. 8:00 Jarand Rystad: There’s a third option: China building even more stocks. They’ve expanded their ability to store crude recently. This year they’ve taken a lot of surplus crude, and I think they’ll continue next year. I also don’t think OPEC will bring back the full 1.4 million barrels per day. That may have been the intention they communicated, but it’s more likely they stay at current cuts. If you use the 3.2 million barrels of growth figure, that already includes about 1.4 million barrels coming back—so I think they won’t do that. Noah Brener: Gas markets are also tilting toward oversupply. This could be good news for Asia and Europe. How does this position gas relative to coal and renewables, particularly in emerging economies? Could low prices push some countries to add more gas into their mix and lock in future demand? Jarand Rystad: We’ll see more coal-to-gas switching globally because it’s a continuum: slightly lower gas prices make switching make sense for some decision makers. Many operators can shift between coal and gas in their portfolios, and sometimes even within the same plant. In the United States, we’re likely to see the opposite: more switching from gas to coal due to increasing gas prices. We’ve already seen coal increase this year in the US. The main structural trend is more renewables. Surprisingly, not only China but also India has seen a decline in coal and fossil thermal generation due to faster-than-expected renewables growth. India is down about 7% so far this year. Some of that is weather-related—an early monsoon—but structurally, renewables growth is also driving it. Noah Brener: We believe the world may reach one or more critical inflection points by 2026: China’s reliance on thermal power declining for the first time, and no net growth in fossil-fuel generating capacity globally because new capacity is offset by retirements. Why are these developments important? Jarand Rystad: We have about 1,100 terawatt-hours of new electricity coming in each year—similar figures for 2025 and 2026. We haven’t reached the end of the year, and extraordinary cold weeks in China could still change the margin, but thermal generation is flat or maybe slightly negative. It’s extraordinary to see that additions are coming from renewables. 12:00 Jarand Rystad: More than half of new capacity is solar, wind is about 30%, and then there’s geothermal, hydropower, and biomass. This illustrates we’re reaching a plateau in global thermal power generation, which could last a few years depending on economic cycles. Structurally, thermal generation starts to decline in a few years as more renewables are added. On renewables, we’re reaching an inflection point where growth could be lower for some years because the system reaches saturation in how much it can absorb without flexibility. We’re lagging on storage, so we need to build more storage to include more renewables in many markets—including China and Europe. It’s encouraging that a lot of new capacity coming in now is battery capacity, creating flexibility. We’ve seen extremely steep renewables growth; I expect it to be flatter for a few years before growth accelerates again, because we need to balance it with storage. In Europe, in some cases more storage than solar is coming in over the next years—the first time ever. Noah Brener: I want to use that as a jumping-off point to talk geopolitics. Battery supply chains are heavily controlled by China. Could rivalry between the West and China limit the global buildout of battery storage in the next couple of years? Jarand Rystad: In the near term, the cells are produced and ordered, and supply chains are relatively settled to get those projects in place. 16:00 Jarand Rystad: Longer term, because China is so dominant, it would take time to replace that if geopolitical events significantly cooled relationships. The technology would be there, but it would take time to develop capacity. OECD countries haven’t really facilitated their own industries to respond to China’s dominance; they’ve largely let China remain dominant rather than challenging through policy measures. Noah Brener: Which events could materially change your outlook? Let’s start with a peace deal in Ukraine—how could that change your 2026 outlook? Jarand Rystad: That would likely lead to even more oil supply, because we would rather let Russia export more than let them get territorial claims. But I don’t think it’s likely soon. Historically, similar conflicts freeze along current front lines, and I think it could be another two, three, four years before something like that happens. Noah Brener: Would it change anything if we see a major climate-fueled disaster? Could that refocus the world’s attention on climate? Jarand Rystad: The statistics are that we had about 180 major climate-related events per year from 1980 to 1999, and about 360 per year since then. It’s doubled, but I don’t think it’s enough to create the shift. The main trend over the last two years has been less attention despite serious climate-related events. Noah Brener: I want to talk about AI. What are you watching in 2026 that will help us understand its implications for energy? Jarand Rystad: We’ve completed a database mapping 13,000 data centers. Today they consume about 112 gigawatts. Next year, on average, it will be 150—growth of around 35–36%—and then approaching 200. A lot of this is done behind the meter with stranded gas in Texas and the Permian, combined with solar and batteries, giving inexpensive energy without influencing the broader power market much. In Virginia, where we have other AI hubs, it is influencing power prices. Globally, AI will only be about 10% of total consumption growth. Electrification of transport and air conditioning are bigger growth sectors. Noah Brener: One opportunity you’ve highlighted for companies is M&A. If we have lower prices, it can be a good time to pick up assets—but only for those with financial ability and strategic freedom. 20:00 Noah Brener: Can public energy companies do this? Will investors support spending for growth if it threatens dividends and buybacks? Or are private equity and national oil companies better positioned? Jarand Rystad: We expect that after 2026 we go into a new cycle—oil prices will go up again. Gas is in a longer down cycle due to a lot of new energy coming in. 2026 is a year of big opportunities if you have deep pockets. One driver will be cost-driven mergers: merging operational units to take out cost—potentially 20%—which can support management’s ambition to do mergers. We also see another driver: international oil companies increasingly want joint ventures with national oil companies to cooperate on field development—IOCs bring capital and competence, and NOCs have resources. We can expect a lot of restructuring and M&A next year. Noah Brener: Does the hybridization of the energy system and increased competition change how oil and gas price cycles work? Jarand Rystad: Investment cycles will continue to exist. Gas cycles are longer, especially since LNG is becoming a globally traded commodity. We’re going into a longer down cycle for gas—maybe until 2030–2032—then a new upcycle later in the 2030s. Infrastructure will be built, and we’ll go from oversupply to undersupply in the mid-2030s. Oil investment cycles will also continue even in a peaking and declining oil market. A lot of oil investment is to arrest natural decline. The price signal will keep driving investment cycles over the next two to three decades. Noah Brener: I want to step back and talk about energy demand. 24:00 Noah Brener: If we subtract losses and remove molecules used for products like petrochemicals and plastics, electricity demand is growing about twice as fast as fossil fuel demand. Could 2026 be an inflection point—are we shifting into a transition phase rather than pure energy addition? Jarand Rystad: In the power sector, that transition is happening this year or next year—we’re at a plateau. For the entire energy sector, it will be another five to ten years. You mentioned that molecules for plastics and materials are more than half of oil growth. Oil is increasingly growing as part of the material system rather than the energy system, even if upstream producers focus on overall oil consumption growth. The pattern we see in power will be repeated for the entire energy system, with a lag of five to ten years. Noah Brener: Coming back to affordability: it’s a driver of the retreat in climate ambition. If decisions are driven more by economics than policy, what does this mean for the pace of the transition in 2026? Jarand Rystad: Some sectors will slow, like EV adoption where incentives are removed. However, in many markets EVs already offer lower cost of ownership, so growth continues. Overall, less supportive policy will be slightly slowing, but not a full stop or reversal. Solar, batteries, and onshore wind have strong business cases, and new fossil investments are generally no longer competitive as baseload. Fossil can still have a role as peaking capacity, but fundamentals are steadily driving the transition forward. Noah Brener: Jarand, thank you for looking ahead to 2026. Before we sign off for the holiday season, what Christmas traditions are you looking forward to? 28:00 Jarand Rystad: A traditional Christmas dinner with my whole family—my two sisters, and my three sons. My brother is going to Bangladesh to visit his daughter this year. That meal is important, with people coming home from abroad. We also do a lot of cross-country skiing during the Christmas holiday, so I look forward to that. And lutefisk is a great Norwegian holiday tradition, though never on Christmas Eve. On Christmas Eve we eat pork belly. Noah Brener: Excellent. Jarand, thank you so much for joining us. Jarand Rystad: Thank you very much. Noah Brener: Let’s recap. Oil, gas, and power markets are all tilting toward oversupply. Consumers in Europe and Asia are likely to feel some relief from high prices in 2026, but not in the US, where higher natural gas prices could continue to pinch consumers. Battery storage should be a big winner next year. Despite rising trade tensions between China and the West, near-term orders are locked in and shipping, so threats from trade barriers are more likely to be felt further out. In the year ahead, companies could take advantage of lower prices to snap up competitors or team up through joint ventures, favoring those with deep pockets and patience. Thanks for listening to Let’s Talk Energy. This podcast is a Rystad Energy production. Check out the show notes for further analysis and connect with us on social media. You can also keep up to date on our website. If you’d like to send questions or ideas for a future episode, reach out directly. This is our last episode of the year. We’ll be taking a short break for the holidays, so please join us on January 14 for more Let’s Talk Energy.