Global energy markets are bracing for a significant transformation as supply and demand dynamics shift in 2026. The International Energy Agency (IEA) projects a surplus of up to 3.84 million barrels per day of oil supply exceeding demand. This forecast highlights the ongoing challenges that major oil and gas companies, often referred to as Big Oil, will face in the coming year.
While geopolitical tensions, particularly in regions such as the Caribbean and Yemen, add uncertainty, the primary focus remains on the established trends within the oil and gas markets. The volatility observed in recent weeks underscores the oversupply situation, where price fluctuations have been less dramatic than they would be in a tighter market. Analysts anticipate that the current oil glut will be temporary, with expectations for a market rebound beginning in late 2026 and extending into 2027.
Predictions for Oil and Gas Supply
According to Goldman Sachs, the year 2026 marks the end of the current oil supply wave. Their Commodities Outlook 2026 report indicates that while an excess supply scenario is likely, risks from disruptions in major oil-producing countries such as Russia, Venezuela, and Iran could impact the market. These events could be exacerbated by a decrease in OPEC+ spare capacity, leading to potential price increases despite the overarching surplus.
In contrast, the liquefied natural gas (LNG) market is expected to experience a prolonged growth phase, with projected exports increasing by over 50% from 2025 to 2030. This divergence between oil and gas supply dynamics will be crucial for investors and stakeholders in the energy sector.
Refining Margins and U.S. Shale Resilience
On a more positive note, analysts from Rystad Energy predict strong refining margins driven by high utilization rates and elevated product crack spreads. This trend is particularly evident in diesel markets across Europe and the United States, which are expected to support robust margins in Asia and the Middle East as trade flows adapt.
Meanwhile, U.S. shale production is projected to remain resilient, with West Texas Intermediate (WTI) crude prices expected to hover around $60 per barrel. While some experts, including those at Wood Mackenzie, forecast a stall in oil production from the Lower 48 for the first time since the pandemic, the Permian Basin continues to dominate U.S. oil output. By 2026, production from the Delaware Wolfcamp, Bone Spring, Midland Wolfcamp, and Midland Spraberry is anticipated to account for more than 50% of onshore U.S. oil output.
As demand for natural gas surges, driven by increased LNG exports and a growing need for electricity, U.S. gas assets are becoming attractive to both domestic and international players. This shift indicates a potential merger and acquisition (M&A) hotspot within the gas sector.
The competitive landscape for Big Oil will become increasingly challenging in 2026. Companies must navigate the complexities of oversupply while managing costs and maintaining strategic balance. As they adjust their capital investments, many firms are likely to pivot towards upstream oil and gas projects, even as they explore opportunities in renewable energy.
The anticipated lower oil prices may compel companies to implement structural cost reductions and potentially trim buybacks. Analysts from Wood Mackenzie suggest that this will intensify the focus on establishing a strong foundation for the next decade, as firms aim to adapt to evolving market conditions.
In summary, 2026 presents a mixed bag of challenges and opportunities for the energy sector. While an oversupply of oil is expected to exert downward pressure on prices, the resilience of U.S. shale and the growth of the LNG market offer pathways for recovery and strategic growth in the years to come.
