December 19, 2025

The oil and gas market was punctuated with volatility in 2025.

Oil prices softened as supply outpaced demand and inventories built. Brent and West Texas Intermediate (WTI) crude slipped in late 2025, with Brent dipping below US$60 per barrel and WTI hovering at US$55.

Production increases from non-OPEC producers — including record US output — and higher OPEC+ quotas have contributed to a notable supply overhang, pressuring crude toward four year lows.

Starting the year above US$70, both Brent and WTI prices have now seen steep declines of more than 20 percent amid signs of weaker demand in major economies like China and elevated global stocks.

Meanwhile, the natural gas market saw price shifts driven by weather and storage dynamics.

Prices started the year at US$3.64 per million British thermal units and slipped to a seasonal low of US$2.74 in August. Values peaked at US$5.31 on December 5, and have since retreated to the US$3.94 level.

The US Energy Information Administration (EIA) raised its outlook for late 2025 and early 2026 gas prices after an early cold snap bolstered heating demand, even as forecasts have moderated Henry Hub projections for 2025 to 2026.

Oil market battles persistent headwinds

2025 saw oil prices fluctuate between highs of US$81.86 (Brent) and US$78.99 (WTI) and lows of US$59.41 and US$55.56, respectively, as the energy market served as a barometer of global political and trade tensions.

“Throughout the year, prices have continued the downtrend they began in April (2024) as OPEC+ continued to hike output and China’s economy continued to struggle under the weight of a flailing property sector, downbeat consumer confidence, overindebted local governments and flagging external demand,” he added.

While the oil market isn’t new to volatility, this year proved different as US President Donald Trump’s on-again, off-again tariffs infused global uncertainty into the energy market.

“We can see that Trump’s ‘Liberation Day’ tariffs pushed prices down to a level from which they’ve not recovered from, barring a spike in June as a result of the 12 day Iran-Israel war,” said Cunningham.

“Since then, Brent crude oil prices have continued to fall as OPEC+ caught the market off guard with its aggressive output hikes, which were designed to win back market share from non-cartel producers.’

Demand growth, underinvestment reshape oil outlook

Meanwhile, OPEC is approaching full production capacity, with Saudi Arabia being the main exception.

“Even though people are talking about lots of supply, demand is still growing,” Schachter said, noting that global oil demand rose roughly 1.3 million barrels per day in 2025 and is expected to increase by about 1.2 million in 2026.

New supply additions are limited, he explained, mentioning Guyana’s offshore discoveries by ExxonMobil (NYSE:XOM), some output from Brazil and minor contributions from Canada.

“Most basins are tired, and not enough money is being spent to bring on production,” Schachter said, predicting that global inventory drawdowns in 2026 will support higher prices.

Despite lack of investment at the exploration level, FocusEconomics panelists are forecasting a rise in both oil and gas supply in 2026 fueled by output growth at existing operations.

Cunningham pointed to organizations like the EIA and International Energy Agency (IEA), which “hiked their forecasts in recent months in response to OPEC+ increasing output unexpectedly fast and the recent surge in demand for US LNG.”

“The real question is not if oil and gas production will increase, but by how much,” said Cunningham.

A ramp up could be curtailed by geopolitical disruptions, he went on to note.

“Recent frictions between members of the OPEC+ cartel will persist, with Russia likely to favor lower production levels given US sanctions and countries like Saudi Arabia and the United Arab Emirates eager to push production higher given their excess capacity and desire to win back market share from non-OPEC+ producers,” he said.

“Moreover, countries like Kazakhstan and Iraq continue to overshoot their quotas, and in late 2023 Angola left the cartel due to disputes over its allowed production level.”

Transport and petrochemicals driving oil demand

Global oil demand is expected to rise in 2026, driven primarily by transportation fuels and petrochemical feedstocks.

Gasoline is projected to lead the increase, supported by recovering air travel and road mobility, while diesel and other products also contribute. Non-OECD regions, particularly China and India, will account for most of the growth, with expanding petrochemical capacity in major economies boosting crude-derived feedstock demand.

Overall, transport and industrial activity remain the key engines behind the expected rise in oil consumption.

“Our panelists see world oil production rising 1.1 percent in 2026 as non-OPEC+ countries such as Guyana and the US hike output,” said FocusEconomics’ Cunningham.

LNG expansion fuels gas growth

Similar to the trajectory for oil, natural gas demand is expected to rise in 2026 as global consumption rebounds and LNG exports expand sharply. “The IEA (is) estimating growth at around 2 percent with consumption at an all-time high on higher demand in the industrial and electricity sectors,” said Cunningham.

Rising LNG supply — with new export capacity coming online in the US, Canada and Qatar — is projected to support stronger import growth, particularly in Asia, where demand is expected to rebound after a 2025 slowdown.

“Asia is hungry for LNG; the IEA estimates the region’s natural gas demand will rise over 4 percent in 2026, with LNG imports up by 10 percent,” the expert said. Increased use of natural gas in power generation and industrial sectors will also contribute to growth, helping push global gas demand toward a new peak next year.

“Of course, these forecasts could change quickly if the world economy or the oil and gas sector is subject to further shocks, which is why we recommend regularly checking the latest forecasts that are available,” Cunningham added.

Further ahead, Schachter argued that rising global power needs will underpin long-term demand for natural gas, particularly as alternatives struggle to scale. Aging power grids are another constraint. Much of the world’s electricity infrastructure has not been meaningfully upgraded, and expanding capacity will require major investment in transmission — driving demand for copper, steel and aluminum alongside new generation.

Against that backdrop, Schachter sees LNG as central to meeting near- and medium-term power needs.

“The demand for LNG is the story,” he said, adding that natural gas is increasingly viewed not as a temporary transition fuel, but as “the most efficient, from a climate and environmental point of view.”

He also highlighted Canada’s advantage as producers invest heavily in emissions-reduction technologies, including methane mitigation. That positioning could make Canadian LNG more attractive to import-dependent nations such as Japan and South Korea.

While new supply from Qatar and the US will add capacity, Schachter cautioned that LNG development is rarely linear, pointing to Canada’s decades-long path to its first operating export terminal. Despite inevitable delays and short-term imbalances, he said the long-term outlook remains clear: “The industry’s fundamentals are very, very positive.”

Cunningham also pointed to increased output from the US and Qatar as key areas to watch in 2026.

“The big Qatari and US LNG projects will help natural gas prices converge globally — our Consensus Forecast is for the percentage difference between US gas prices (which tend to be lower due to huge domestic production) and those in Asia and Europe to ease to the lowest level since 2020, the year the pandemic sent gas demand plummeting,” said Cunningham, adding, “In short, record US LNG shipments will send up prices at home and lower them abroad.”

Cunningham went on to explain that unlike oil, in the natural gas market there tends to be more price divergence between regions as natural gas is harder to transport over large distances. Oil can be poured into a barrel and shipped, whereas natural gas first needs to be liquified if it’s to be sent overseas. Greater LNG capacity will help bridge this gap.

Oil and gas price forecast for 2026

Schachter expects WTI to average over US$70 in 2026, with Brent around US$73 to US$74.

He anticipates some volatility early in the new year, saying that in Q1 he expects trading to be “still sloppy between US$56 and US$66,” before prices rise in Q2 to US$62 to US$72. From there, he sees prices reaching US$68 to US$78 in the year’s third quarter as inventories tighten and market fundamentals assert themselves.

“People think we’re going back to US$80 today. US$58 oil — it ain’t going to US$80. But when the industry is in rational supply and demand, prices climb, especially when inventories draw down quickly,” Schachter said, recalling the 2008 peak in oil prices near US$147 during extreme supply shortages.

Looking at the year ahead, FocusEconomics expects the trends of 2025 to continue.

“Average Brent crude oil prices will ease further to a post-pandemic low, while US natural gas prices will increase to the highest average level since 2014 barring 2022’s Russia-Ukraine-war-driven spike,” said Cunningham.

“OPEC+ is set to continue raising output — after a pause in Q1 2026 — and the global economy should slow as the boost from export front-loading ahead of US tariff wanes.”

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

This post appeared first on investingnews.com

Keep Reading

Those worried about shuttering the U.S. Agency for International Development (USAID) were wrong, according to Secretary of State Marco Rubio, who touted the agency’s record in delivering support in the wake of Hurricane Melissa that ravaged the Caribbean in October.

Although USAID historically functioned as an independent agency to deliver aid to impoverished countries and development assistance, the State Department announced in March that it would absorb remaining operations and functions in an effort to streamline operations to deliver foreign assistance amid concerns that USAID did not advance U.S. core interests. The move resulted in cuts for thousands of USAID employees.

Critics including Sen. Bernie Sanders, I-Vt., said that upending the agency would ‘lead to millions of preventable deaths,’ while a group of House Democrats wrote a letter to President Donald Trump in February as USAID cuts got underway that changes would lead to increased maternal and child mortality.

But Rubio now claims those skeptics’ fears were unfounded.

‘Alarmists in politics and the media forecasted that the closure of USAID would result in catastrophe. Now, nearly a year later, they’ve been proven wrong,’ Rubio said in a statement to Fox News Digital. ‘The State Department has realigned foreign assistance with the interests of the American people, streamlined disaster response capabilities, and leveraged the ingenuity of American companies to save lives.’

Specifically, Rubio pointed to the assistance the State Department provided in the aftermath of Hurricane Melissa, which hit Jamaica as a Category 5 hurricane and was the strongest to strike Kingston since the island started tracking its storms 174 years ago.

The State Department deployed a regional disaster assistance response team (DART) and activated U.S.-based urban search and rescue (USAR) teams to support response efforts in the region as part of recovery efforts.

Likewise, the State Department allocated roughly $1 million to go toward administering food and other resources to those in need, using predesignated supplies housed in 12 different warehouses across the region. Ultimately, the State Department coordinated with the United Nations World Food Program to distribute 5,000 family food packs to families in Jamaica.

‘This new era of foreign assistance eliminates extreme ideological projects that previous administrations forced the American people to subsidize, cuts out the wasteful NGO industrial complex, and puts the American people first,’ Rubio said.

Sanders’ office did not respond to a request for comment from Fox News Digital.

The Department of Government Efficiency (DOGE) targeted USAID in its push to eliminate wasteful spending during a review earlier in 2025. The agency attracted scrutiny for a series of funding choices, including allocating $1.5 million for a program that sought to ‘advance diversity, equity and inclusion in Serbia’s workplaces and business communities’ and a $70,000 program for a ‘DEI musical’ in Ireland.

USAID was officially closed down in July — a move that attracted criticism from Democrats and former Presidents George W. Bush and Barack Obama.

‘Gutting USAID is a travesty, and it’s a tragedy,’ Obama said in a video that was shown to departing USAID employees, according to The Associated Press. ‘Because it’s some of the most important work happening anywhere in the world.’

Obama labeled the decision to upend USAID ‘a colossal mistake,’ and said, ‘sooner or later, leaders on both sides of the aisle will realize how much you are needed.’

Meanwhile, the State Department is undergoing its own transformation. In addition to absorbing USAID, the State Department has undergone a massive overhaul as part of the largest restructuring for the agency since the Cold War.

Additionally, it rolled out an America First Global Health Strategy in September to deliver health aid worldwide by working directly with recipient country’s governments instead of through non-governmental organizations and other aid programs.

In December, Kenya became the first country to sign a five-year, $2.5 billion Health Cooperation Framework agreement with the U.S. in alignment with this new strategy, which also aims for recipient countries to eventually bear more responsibility for their own health expenditures.

Fox News’ Emma Colton contributed to this report.

This post appeared first on FOX NEWS