Supply, demand and geopolitics: Oil markets in 2026 with Janiv Shah and General Index's Corey Stewart

[00:00] This is Let's Talk Energy, your go-to podcast for smart energy insights. I'm your host, Noah Brener, and each week, we're bringing you an inside look at the dynamic shaping global energy markets through in-depth conversations with our own Ryad Energy experts and some special guests. For our first episode of 2026, we're diving into the global oil market to try to understand how supply, demand, and geopolitics could influence prices for the most important traded commodity in the world. Forecasters almost universally agree that crude markets are likely facing significant over supply in the months ahead as growth in oil supply outpaces growth in oil demand. While prices for benchmark Brent and West Texas Intermediate or WTI have certainly drifted down in recent months, both prices and balances have proved more resilient into the end of 2025 than many had expected, and they're continuing to hold up in the early days of 2026. So, just how much extra oil might be slloshing around in the global market, and will it necessarily trickle down to the prices consumers pay for fuel? Will geopolitical turbulence, including the recent arrest of Venezuela's President Nicholas Maduro, outweigh the fundamentals to support higher than expected oil prices? Or if prices do fall further, how might key producers such as OPEC plus and US shale players react? To help us understand the most important drivers influencing 2026 crude and products markets, I'm joined today from London by Genev Shaw, a vice president and oil markets expert in our analysis division. Geneive, welcome to the program. Good day, Noah. Thank you for having me on today. And I'm joined from Houston by Corey Stewart, director of pricing for America's for General Index. Corey, welcome. Thanks, D. Happy to be here today. Well, gentlemen, let's talk energy. Corey, before we get started, I think most podcast listeners are familiar with Ryad Energy by this point, but they may not know General Index. So, can you quickly just give us a snapshot of what general index does? General Index or as we call it and as are on our ICE listings, GX is a global commodity pricing agency focused on delivering independent transparent price assessments across crude oil, natural gas, environmental products, just commodities in general. What differentiates us is that we are deeply rooted in the physical market. Our prices are built off real transactional data, robust methodologies, and constant engagement with market participants. I do want to make this disclaimer. It's important to note that GX is not currently involved in forecasting. So much of what I say today is my opinion and not necessarily held by others at GX. Also, I'm fortunate to lead a highly capable team in Houston with deep specialized knowledge across their respective markets and and to be part of a broader global global market experts. GX, what I want to start with is prices. I think that's what people care about the most and then we're going to work back from there and figure out how we arrived at some of those those figures. So, where do you each, I guess, see average oil prices in in 2026? And then maybe what might be the exit, a price on say 31 December. And then we can kind of understand the trajectory we might be seeing in the market. Geneive, let's start with you on this one. To be honest with you, even trying to trying to forecast the price until the 31st of of January is probably as difficult as any other year. There's a huge amount of geopolitics of course in the last four or five days that have taken the world by storm. Specifically looking at what's happening with the US and Venezuela. But let's not also forget that there's still a big Russia Ukraine bubble which is still waiting to either expand or or burst in a separate way. Where do we see prices for 2026? Our average is around $60 and that is an $8 drop from 2025's average. But that forecast was done pre the end of the year. So pre US Venezuela eruptions which also means there's a bit of downside risk to our prices. We may be looking at instead of an $8 drop closer to 10 maybe even going deeper into the double figures 11 or 12 year where we sat in our current estimate at the end of this year we're at a 58ish dollar range. you know the cyclic seasonal pattern as summer demand heats up prices also start to increase but then it's obviously with drops through the the end of the year with Q4 we might see some downside risk to every month shifting down by a dollar or two this geopolitical risk premium is overtaking absolutely everything and today's announcements by anyone in the market could be reversed tomorrow by another announcement from a separate part of the world. Cory where do things sit for you how do things Look, I think 2026 looks like a market that broadly remains, you know, rangebound rather than directional. I put the average Brent price somewhere in the the low to mid60s. Mid is probably stretching. I'm here the low largely because we have enough supply growth to prevent sustained rallies, but also enough supply management and geopolitical risk, but also to prevent a collapse. So by year end, I think prices could be somewhat softer, probably low 60s to maybe even high 50s, 57, 58. I think that's that's very reasonable. Especially if inventories build and time spreads weaken. What I'd emphasize is that the market may feel weak structurally without necessarily being cheap outright. A lot of the signal will come from the shape of the curve rather than the flat price. [04:00] Obviously, the big news of the past week has been Venezuela, the removal of Maduro, questions about what comes next for the country's oil industry. Prior to the Alistster Maduro, we saw the US set up a naval blockade and commandeer dark fleet tankers to really shut down Venezuela's crude exports. Honestly, in both cases, markets didn't move too much and when they did, it didn't really hold. So Corey, let's start with you. Why didn't we see Venezuela cause a more dramatic and sustained impact? In pricing terms, those barrels have already been written off as far as like reliable supply. So for years now, Venezuelan crude has traded with heavy discounts, regular flows, and constant political risks. You know, markets don't respond strongly to disruptions in supply that they weren't fully counting on in the first place. Another factor is the refiners have already adapted, right? So buyers who once relied on Venezuelan crates have diversified their slates, invested in flexibility or found alternative heavy barrels. So when enforcement actions or blockades happen, so as you mentioned, they feel more like confirmation of risk rather than a new shock and prices tend to shrug that off. It's going to take a significant amount of time to repair Venezuelan oil infrastructure. Hopefully Genevieve will agree with me there to get anywhere near where the country was historically as far as production and exports. I mean, how long have we seen the US military activity going ongoing in the Caribbean in relation to Venezuela? Perhaps the capturing Maduro was not on our bingo cards this year. But US policy towards Venezuela and the inherent price risk has been to me at least priced in for a while. Well, Geneive, you brought up the potential for this the developments in Venezuela to to actually lower Ricead Energy's base case prices by a buck or two maybe. So there could be some impact even if it's not immediate. what are I guess some of the scenarios maybe near-term and then I say medium-term but really let's put a a book end on it at the end of of this year that you're watching in terms of how Venezuela could impact the oil market what the market's looking at is how quickly can Venezuelan production ramp up and that is not a 2026 story that is much much beyond right so what we're seeing from the numbers is around 50ish billion dollars worth of upstream infrastructure investment is needed over the next 15 years. I know you mentioned what's happening at the end of this year, but over the next 15 years to just maintain flat production at 1.1 million barrels a day. With that, the upside in the immediate short term, and this is the immediate short term of 2 to 3 years, is only around 200 to 300,000 barrels a day. So, all in all, it's a drop in the ocean for a global liquids market, which is 100 plus million barrels a day of supply. And if you're talking about crude and condenser alone, it's 80 or 85 million barrels a day. So 200 or 300,000 barrels a day additional is is rather minimal going forward to you know what was typical historic Venezuelan production volumes 3 million barrels a day we only see that coming to fruition around 2040 and the issue with that or it's not really an issue is it requires a huge amount $35 billion of in international investment or international capital there are short-term risks and a lot of should some risks reside with what's happening within China and the Chinese refineries sourcing material and how the reshuffle of of heavy crude will will occur. But on the shorter term, it's also what is the stability from a political sense within the Venezuelan governmental regime and how does the US you know let's not use dictate but how does the US move forward from the 21st century's addition of the Monroe directive. So it's very much a US policydriven understanding of what could happen next, but it's heavily weighted towards the end goal. The end goal here first and foremost being lower energy prices in the UK in the US for consumers and gasoline pump prices at at the start. Do we see this same kind of overupp of of products as we do of crude and therefore lower prices or is this actually a case of you know 2026 being a very good year for for refiners? And either of you feel free to jump in to to start that one. I'll start off and Geneive I'm sure you have some information there as well but products markets don't look overs supplied in the same way crude does and that distinction really matters. While crude supply growth is rel relatively abundant, refined products are constrained by capacity outages, maintenance cycles and product spec specifications that limit how easily the system can respond. Demand for products like like gasoline like the marquee products, gasoline, middle distates is still so tied closely to mobility and economic activity and in many regions that demand remains resilient even when crude balances look long. As a result, 2026 could still be a relatively constructive year for refiners. Margins are likely to be more volatile and more regionally differentiated, but we continue to see structural tightness in certain products particularly middle distillates alongside limited new refining capacity. that means lower lower crude prices don't automatically translate to weaker refining economics and in some cases they can actually support margins by reducing feed stock cost while product prices remain firm [08:00] the crude market is is seeing a growth if I put the numbers out there from our from our rice data is seeing a growth around 2.4 4 million barrels a day. And if you look at a crude balance, a crude concept balance, the refinary run growth year on year into 2026 is only 770,000 barrels a day. So there's a huge amount of over supply which is putting a lot of pressure from a fundamentals perspective on the crude market. Let's switch over to the products market. Noah, as you mentioned, that's the the question the key question here is that we're only seeing product demand growth of end use products of around 860,000 barrels a day. So not huge, not a million barrels day like of growth like it was pre- pandemic on a historic straight line chart but nevertheless let's not make no mistake for another year another consecutive year it is higher than the refinary run growth year on year this is what we're seeing is is a continued tightness in the products market and yes it's split regionally and again split by each product so we're looking at continued strength here in Europe sat with a distillate or diesel gas oil markets with the US something similar on gasoline. And if we look at a typical or the average yield for 2026 for gasoline in the US, we're sat at 50.5%. Which has some upside of course with the capture of or the incremental 30 to 50 million barrels of Venezuelan heavy sour which can be upgraded. But here within diesel within the European diesel yields we're seeing around 43% which has a significant upside. But we are now in the Atlantic basin constrained by a lot of refinery based economics and closures. Asia and the Middle East are the the two key regions where we see a lot of upside potential in raw utilization in raw capacity upside and in raw refinery runs at the end of the end of the equation. So this could be the answer to the rest of the global tightness. But from the refinary margin perspective, not a bump a year from 2022 with the Russia year. It has been decreasing every year thereafter and we do see some decrease from 2025 into 2026 but still remains supported. So tightness in the products market and some bearish news for the crude market. So I want to talk about some wild cards here on both the supply and the demand side and and let's start with demand. in 2025, China played a big role in putting a floor under oil prices by building larger crude reserves, essentially stockpiling some of this quite affordable crude met a rate that was quite honestly unexpected by many. so do we see that continuing that stockpiling continuing into 2026? And could that potentially provide some upside to these demand figures that we've just cited? The Chinese stockpile numbers for 2026 are almost downgraded from 2025, but still have some downside risk. So, we're looking at a 220,000 barrel a day on average stockpiling basis for 2026. But a lot of this is is is known by the discounted barrels. So, the Venezuelan, the Russian and Iranian grades. Now, with the rerouting with the potential full rerouting of the 500,000 barrels a day from Venezuela that flowed over to China in 2025 on average, that provides a little bit of downside risk. And and where will China decide to purchase this discounted basis from? We are seeing early reports of Iran could be the answer, but there are very few alternative answers to to the Venezuelan heavies. You know, you could have Canadian barrels which aren't discounted flow at market rate as well as Iranian grades. So, who again under a little bit of a discount but again sanctioned. So, let's not make a mistake that it is a supporting factor but it is slightly diminishing with the latest news of of Venezuelan material flowing away from from China. Generally, I agree the same thing. Right. So, China strategic from commercial stockpiling. It's been a meaningful wild card and I do think it continues to play a role in 2025. if you've gathered some numbers around that, although probably in a much more opportunistic way, a less consistent way than it was in 2025. So of course when prices soften and time spreads move into contango, China has shown a willingness to step in and absorb barrels into storage as you mentioned that's that's limited there, which effectively puts a floor into the market. So even if we even if in use demand is not particularly strong from a demand statistics perspective guess that matters because those barrels still show up as crude demand even though they are not immediately consumed. So global demand can look healthier than underlying in use might suggest. I think the key point here is that this this type of demand is price sensitive and discretionary. It supports downside when prices are weak and it's unlikely to drive sustained upside or strong price rallies on its own. [12:00] I want to switch over to the supply side. the two most flexible and and therefore probably price sensitive sources of of oil are the OPEC plus producers group and their production policy. as well as US shale producers who have that flexible short cycle supply. I mean the question I keep getting asked is is who will reduce production first or or more out of those two two groups? And I want to start with perhaps how OPEC could react to to this market and and the trade-offs between defending market share and and defending price. Geneive why don't we why don't we start with you there the market share is let's say twofold there is the global market share from a long-term perspective which is based on raw production volumes from OP plus and I guess nonopic plus which moves very minimally. the other market share perspective that that is a bit more dynamic is how much how many volumes or how many barrels flow over from the Middle East let's just say the Middle East or plus nations into specific markets. Let's just talk about how Saudi allocations from their barrels go into China and that is a market share that they would be protecting as we've seen with the Saudi OSPs dropping and allocations to China rising as a result. So there is cause for a little bit of cause of for concern without putting too much stress on that because the the way the market's been managed by OPIC plus is within the market structure right protecting the backdation such that when there is any supply requirement that you know the traders who could have stored barrels during a contango phase are not able to but it's instead OPEC spare capacity which could be drawn upon to you know provide those barrels for the market that is a worrying sentiment because 2 days ago the Dubai M1 M3 flipped into contango. So there are signs and signals now that this impending over global over supply that has shattered over the market for the last five or so months is actually coming to fruition and we are flipping from a market structure of backation into contango. What's on the cards next for OPEC plus? yes there is the pause the pause of the unwind for the 3 months that could be extended beyond the 3 months beyond the first quarter of this year but you know let's not write off that they could start to accelerate if there is more of a market share understanding or they could also continue to pause or even maybe cut at some point in the future. So very dynamic and it's based on a month- on-month based on the the market structure is the OPEC plus way. Cory you're in Houston the epicenter of the US shale industry. What what do you think about how US shale producers could respond? I mean, they're going to need to balance capital spending needed to to keep those barrels coming out of the ground as well as the trade-off with with continuing to pay their shareholders dividends and and buybacks that have become to be expected. So, what does US shale do? The capital discipline is real. shareholder returns matter and most producers are operating within relatively fixed capital frameworks means short-term volatility does not immediately translate into drilling decisions. We've seen some of this over the last couple of years. Another key factor is hedging. So many producers lock in cash flows months or even years ahead which smooths their response to these price changes. So unless prices stay low low for prolonged period we are unlikely to see really a sharp supply pullback. Shell is responsive but it is not impulsive anymore and I think that has big implications for how price prices. Janeive, do you have a view on at what price that shale might need to to be responsive? The the number sort of differentiates by basin, by quality, also by operator. Of course, you got the bigger operators who have a better break even. but you know, the number out there is starts with a five and we're starting to hit that range. in especially in TI TI TI this morning or TI today was around $556. So it's still profitable but much is to be seen how much that can be depressed by the avalanche of material coming into the US system as a whole. [16:00] I want to come back to to this idea of geopolitical risk that that both of you touched on at the top of the program. Russia Ukraine war including air strikes on oil infrastructure, sanctions on on Russian producers and obviously the the shadow fleet and we still do see continued tensions in in the Middle East. so which developments I guess in either region do you think have the potential to move crude and products markets? I mean, Cory, as you said, we kind of which barrels are being counted on and and what could happen in those two kind of spheres that you think people need to be aware of and what's already priced in. I guess Cory, even though the market has been somewhat muted in its response to geopolitical events, especially with Venezuela, developments in both regions that you mentioned, they remain critical, particularly for the flow and pricing of certain crude grades and refined products. in Russia and Ukraine air strikes, sanctions, export restrictions can immediately affect the availability of medium and heavy cruts that that Europe and Asia rely on. So creating additional tightness in specific differentials even if global crude balances are technically long. Product markets can be even more sensitive especially diesel and jet fuel. So middle distates in Europe where supply is already tight and alternative sources are limited. Now in the Middle East, the biggest risk come from disruptions to key shipping choke points, production outages, which is kind of always something or escalations that could temporarily temporarily remove those barrels from the market. So even the short-term disruptions can ripple through prompt and regional markets affected both crude and products. I think for traders and refiners the key is understanding which specific grades and products are are exposed because overall headline supply may appear adequate while the localized shortages create volatility and prices and spreads. Chief I mean we have been talking generally or oftentimes quite generally about you know oil and not these specific grades. I mean, where do you see the potential for either tightness or or potential loosening markets when we're looking at at specific types of crude that you know, based on the viscosity and the chemical composition across the world? Talking about Russia, Ukraine, just just really quick is that yes, that's probably one of the the solvable actions or solvable points in the world over the next let's say half year. And part of the reason why is you're looking at midterms on the US side for this year which the ultimate goal of of reducing energy costs and freeing up Russian not just crude but Russian products into the global system could support well could depress and support a bit more loosening of of everything. Noah your question here around the tightness in some specific cruds. yep. We we've we've mentioned here the Venezuela quite in quite a bit of depth, but yes, Venezuelan heavy sour and the replacement barrels for these for Chinese refiners are typically Canadian heavies or even Iraqi buzzra heavy barrels which are not in a huge amount of over supply right so the light sweet basis or light sweet complex in on the crude market is very much well over supplied you'll see how Brent TI Brazilian guy grades all of these Argentina they're all coming onto the market in increasing volumes. So, it's very much the sour and the the heavy volumes and heavy barrels which are under supplied moving forward. This is likely to be the continued case. Even though there is a global over supply of crude, there are still some complexes which are under a little bit of pressure. If you look at where the sanctioned balance comes from and where the non-sanctioned balance sits, the sanctioned balance including Venezuela, Russia and Iran, typically only export. So there's lack of importing basis into those countries. So those are the ones in terms of the bottleneck which could support a little bit of loosening in the global frey in the global market. [20:00] I want to switch over and talk a little bit more about about demand. you know I guess are there other countries we've talked quite a bit about China primarily when it comes to demand. Are there other countries whether that's India obviously rapidly growing massive economy the US that we should be watching as as bellweathers to understand what the the demand trajectory is going to to be or is this really a is demand a China story? Does it continue to be a China story in in 2026? And either of you feel free to jump in there. There are a few other countries and regions I'd say that are worth watching pretty closely. So Southeast Asia as a whole is becoming increasingly important. particularly countries like Indonesia, Vietnam, Thailand where oil demand growth is is closely tied to economic development. Rising vehicle ownership and expanding aviation markets. These countries do not individually move the market but collectively they can meaningfully influence global demand growth at the margin. The Middle East I think is another underappreciated demand demand signal. domestic consumption in countries like Saudi Arabia and the UAE can swing significantly based on power gens, pricing policy and economic activity. And finally, Europe matters less as a growth engine but remains a useful barometer. So I think sharp changes in European demand often reflect broader economic stress or recovery and which can ripple through global oil markets even if the region itself is structurally in decline. If I would say one thing, it would be across the product split. So diesel, gasoline and a few other complexes have reached a pre- pandemic values or demand bases. So the only one that is one of very few including third is jet right. So jet for some regions and countries hasn't really fulfilled or or reached its pre- pandemic levels let alone hitting the growth potential. So that is one of the key growth areas that we see specifically even for China right going into 2026 and 27. this is the the complex which is increasing as a yearon year. other than that agree fully with you Corey India and even Southeast Asia are are likely that the hot spots moving forward in terms of growth and economic development but the direct crude burn perspective within the Middle East as temperatures get hotter for power generation let's all keep a very close eye on that. Last year was a bit of strength, a million barrels plus. This year we could see a little bit more, but there's the weather prediction. we we have to wait for for that one. Gentlemen, it's been a fascinating conversation. we are bumping up on time here, but I wanted to just give one one opportunity. any wild cards that you would flag up. things that, you know, maybe just to keep an eye on. I'm thinking last year, you know, we had the surprise of China's LG trucking industry kind of taking off and all of a sudden undercutting some of the demand assumptions. you know, maybe one thing, couple of things that you would say, okay, you know, keep an eye on this. We don't know which way it'll go, but but this is a wild card worth worth knowing about. I think that risk is very real and the experience with LG fuel trucking in China is a good example of how quickly demand assumptions can change. when the economics line up, substitution away from oil can happen faster than most forecasts anticipate. We all kind of realize that especially in segments like trucking or fuel cost are a major operating expense. I'd say that like electrification is still at an earlier stage, but you know, improvements in battery technology, charging infrastructure, and policy support. I mean, it could start to have a measurable impact at some point sooner than than many miles assume. That said, I think this likely shows up more as a drag on demand growth rather than outright collapse in demand. I think it's less about oil demand falling sharply and more about incremental growth being shaved off year after year. So for the market that kind of surprise matters because it reinforces the idea that demand is less reliable as a balancing mechanism putting more more of a burden on supply discipline to support prices and also this again it's it's about how the economics line up hub based shipping works well for for example electric delivery vehicles maybe LG trucks and in the case of somewhere like China versus the US it's just maybe a longer kind term thing even for personal vehicles there wasn't a rotation out of a an established car park. So, it was purchasing of new vehicles and and I jumped on this. It's a shameless plug, but be watching GX next year or this year. Sorry, what's it we're in 2026 this year for for LG indexes this year. Bingo bingo list for for this year. I'd say keep an eye on on refineries. that's the very broad but yes with the current strength in the products market that's we're forecasting to continue through this whole year the entirety of the year and the weakness in the crude market just means margins are going to be fantastic. So we do see continuation of and maybe some refineries even decide to forego some maintenance. just putting it out there that could be it could be a thing but running harder higher utilization rates also means higher unplanned outage basis and a bit more volatility on cracks. I think the other one if I bring the second point in is likely to be the tanker market. In recent days, we've seen the the US chase a Russian or not Russian vessel across the water. And let's be aware that this is probably some form of pressure and allowing for sanctions to either continue be elevated to another level or for them to come off in the form of a peace deal. So this you know the evolution is starting to spread across multiple assets and multiple markets. And let's be aware that this could spread into anything else. stability is fantastic. you've seen how gold has popped off and continues to be strong. So, I guess 2026 proves to be a little bit volatile much like the previous couple of years. [28:00] Well, gentlemen, thank you for a fascinating conversation. really appreciate your time and joining us on the program. Thanks, Robin. Appreciate the conversation. Let's recap. They're shaping up to be a material surplus in oil markets, but shifts in supply, particularly from the OPEC plus group, could help alleviate some of the impact on prices. Geopolitical events are certainly impacting prices, but are more likely to keep prices from going lower rather than pushing prices up as we may have seen in the past. And finally, low oil prices may not fully trickle down to prices at the pump or at the airport, as tight refining capacity means oil product markets are not nearly as overs supplied as those for crude. Thanks for listening to Let's Talk Energy. This podcast is a production of Ricead Energy produced by Lara Rodriguez Scowg and Bog. Check out the show notes for further analysis on the topics that we've discussed in this episode and connect with us on social media. We're @ Ryaden Energy on all your major platforms. While you're there, please leave us a review, click that subscribe button, and hit the like button as well. You could keep up to date with us as well on our website. If you'd like to send us questions or reflect on today's show, email us directly. It's podcast at ryadenergy.com. And most importantly, don't forget to join us next week for more Let's Talk Energy.