Energy outlook: 12 trends set to shape 2026 power spectrum

January 2, 2026, by Melisa Cavcic

With market volatility, geopolitics, and policy repercussions expected to be among the key drivers affecting the global energy landscape, Rystad Energy, an energy market intelligence group, has outlined 12 predictions for the year ahead, noting opportunities and challenges that will unfold alongside increasing complexity, including the role of fossil fuels and new energies in meeting growing power demand from data centers.

Rystad claims that 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. As a result, OPEC+ policy, exploration results and mergers and acquisitions (M&A) are anticipated to set the tone for supply growth and define market conditions.

Jarand Rystad, Founder & CEO, highlighted: “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. […] 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.”

Rystad expects oil to experience the largest oversupply due to an additional 3.2 million barrels per day (bpd) that would enter the market should OPEC+ decide to unwind its voluntary production cuts. However, the firm’s CEO also believes that gas markets will be oversupplied, as a result of new liquefied natural gas (LNG) capacity being brought online.

The company’s Founder & CEO emphasized: “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. Surge in global refinery utilization to support strong margins

Susan Bell, Senior Vice President of Commodity Markets – Oil, explains that global refinery capacity utilization is projected to rise despite weak growth in oil product demand in 2026, at under 800,000 bpd, while product demand growth is expected to average nearly 900,000 bpd.

Refinery capacity growth is said to have lagged oil product demand growth since 2023, with demand outpacing capacity by an average of 400,000 bpd each year, which is to be compounded in 2026 by further capacity rationalization in the U.S. and Europe, together with slower investment in Asia and the Middle East.

2. Despite low prices, U.S. shale output to remain resilient

Matthew Bernstein, Vice President of North America Oil & Gas, has elaborated that even though prices are teetering near the key corporate breakeven level of $60 per barrel of West Texas Intermediate (WTI) crude heading into 2026, output is estimated 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,” added Bernstein.

3. Rystad depicts 2026 as being pivotal for global energy supply chain

Binny Bagga, Senior Vice President of Supply Chain Research, underlined that the global energy supply chain is set to undergo major changes in 2026, as early-year softness in oilfield services is forecast to give way to a gradually improving second half of the year, when capacity tightness and pricing momentum are anticipated to resurface in deepwater, subsea and select international markets, while North American land activity remains muted.

Bagga underscored: “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.”

4. Global LNG market poised for transition year

Xi Nan, Head of Gas & LNG Market Research, claims that global LNG supply is set to increase by around 30 million tonnes in 2026, driven primarily by project ramp-ups in North America, while Asia-led buyers are anticipated to absorb a large portion of the additional volume, with market fundamentals still needing to navigate project commissioning risks, weather-driven demand swings, price volatility, tightening environmental regulations and ongoing geopolitical disruptions.

Nan stated: “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.”

5. China to see further crude stockpiling

Rystad’s research shows that rapid expansion of storage capacity will get China to significantly bolster its strategic crude oil inventories in 2026, with approximately 70% of its crude supply reliant on imports, positioning the country as a crucial swing buyer in the global market. The Asian player is expected to remain heavily dependent on imported crude in the short term.

6. Rystad paints picture of stronger economy, softer energy, and uncertain geopolitics

Claudio Galimberti, Chief Economist, is adamant that the macroeconomic outlook is increasingly constructive in 2026, as the artificial intelligence (AI) investment boom gains momentum, while the U.S. midterm cycle limits fiscal tightening and major central banks are easing into an environment where global inflation stays surprisingly low.

Galimberti elaborated: “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. Global upstream sector facing uncertainty

Artem Abramov, Deputy Head of Analysis, underlines that the upstream sector could face headwinds in 2026, with global oil markets potentially witnessing oversupply topping 3 million bpd by the end of next year, even if China aggressively fills its strategic crude storage; thus, the structural imbalance is likely to impose a hard ceiling on prices, making $70+ oil unlikely.

Abramov underscored: “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 on the rise, primarily in Americas

Marina Domingues, Head of New Energies Research, is of the opinion that the U.S. and Americas data center market is experiencing rapid growth, mainly driven by demand from AI and other high-performance computing services. Out of the top 15 countries where Rystad expects the largest growth in data center capacity, four are in the Americas.

Domingues continued: “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. Supply gap on the horizon in Asia with delayed FIDs and sluggish energy transition

Prateek Pandey, Head of APAC Oil & Gas Research, believes that slump in FIDs and a slow 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.

Pandey pointed out: “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. Growth in calls for portfolio enhancements within frontier blocks

Aatisha Mahajan, Head of Exploration – Oil & Gas, claims that 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 and supporting 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.

Mahajan added: “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. $150 billion of upstream opportunities to drive M&A activity

Atul Raina, Vice President of Upstream M&A Research, notes that global upstream M&A activity is set to continue the ongoing slowdown in 2026, with nearly $150 billion-worth of opportunities currently on the market, marking the second consecutive year of reduced activity following two years in 2023 and 2024, when deal value exceeded $200 billion, driven largely by a consolidation wave in U.S. shale.

Raina explained: “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. Slowdown in the air for renewable energy capacity growth with 7% drop

Carlos Torres Diaz, Senior Vice President of Head of Power, is convinced that next year will be pivotal for the power sector, as a significant slowdown in new renewable capacity is anticipated for the first time since the early 2000s, with additions from renewable energy sources like solar PV, wind and hydro expected to total 650 gigawatts (GW).

Diaz emphasized: “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.”