Oil under the microscope: What drove prices in 2025 and what lies ahead in 2026?

In a discussion with Matt Cunningham, an economist at FocusEconomics, the key forces that shaped oil and gas markets in 2025 and the outlook for 2026 were examined. The conversation explored how economic fundamentals, policy decisions, and geopolitical developments influenced movements in crude oil and natural gas prices, highlighting the diverging paths of the two commodities. The discussion also looked ahead to next year, addressing supply and demand expectations, LNG capacity, and the geopolitical risks that will continue to define global energy markets.

What were the key economic, fundamental, or geopolitical factors that shaped oil and gas prices in 2025, and which are likely to dominate in 2026?

Cunningham said that the Brent crude price chart this year can be seen as a visual summary of the defining market events of 2025.

Throughout the year, prices continued the downward trend that began in April of the previous year, as OPEC+ persisted with output increases while the Chinese economy struggled under the weight of a weak property sector, subdued consumer confidence, high local government debt, and slowing external demand.

In addition, the “Liberation Day” tariffs imposed by US President Donald Trump pushed prices to levels from which they never fully recovered, apart from a temporary spike in June driven by the 12-day war between Iran and Israel.

Since then, Brent prices have continued to decline after OPEC+ surprised the market with aggressive production increases aimed at reclaiming market share from non-OPEC producers.

Natural gas followed a different path. While prices were initially hit by the tariff announcement, the broader 2025 story diverged sharply from oil. Prices moved higher, with the US benchmark Henry Hub reaching its highest level in nearly three years.

Trump’s election as US president provided support for US gas prices, as he moved quickly to accelerate approvals for liquefied natural gas exports. This led to a surge in LNG shipments this year to record levels.

Looking ahead to 2026, FocusEconomics expects the main trends of 2025 to persist:

Average Brent crude prices are projected to fall to their lowest level since the COVID-19 pandemic.

US natural gas prices are expected to rise to their highest annual average since 2014, excluding the 2022 spike linked to the Russia–Ukraine war.

OPEC+ is expected to continue raising output after a temporary pause in the first quarter of 2026, while global growth is likely to slow as the effects of front-loaded exports ahead of US tariffs fade.

Supply-side uncertainty was a major theme in 2025. How do OPEC+ production decisions affect the outlook for next year?

Global oil and gas production is expected to increase in 2026.

Institutions such as the US Energy Information Administration and the International Energy Agency have raised their forecasts in recent months, reflecting faster OPEC+ supply increases and strong growth in demand for US LNG.

The key question is not whether production will rise, but by how much.

Internal frictions within OPEC+ are likely to persist. Russia may prefer lower output levels given US sanctions, while countries such as Saudi Arabia and the UAE are expected to push for higher production, supported by spare capacity and a desire to regain market share from producers outside the alliance.

At the same time, countries such as Kazakhstan and Iraq continue to exceed their production quotas, while Angola exited the group in late 2023 after disputes over permitted output levels.

On the demand side, do you see global consumption growth approaching a plateau, or is the market still underestimating Asian demand strength in 2026?

Global demand for oil and gas is likely to rise next year.

FocusEconomics expects global oil output to grow by 1.1 percent in 2026, driven by higher production in non-OPEC+ countries such as Guyana and the United States.

Natural gas demand is also expected to increase. The International Energy Agency estimates growth of around 2 percent, pushing consumption to a record level, supported by rising demand from industry and power generation.

Asia remains highly dependent on LNG. The agency projects regional gas demand to rise by more than 4 percent in 2026, with LNG imports increasing by around 10 percent.

These projections could change quickly if the global economy or the energy sector faces new shocks, which is why continuous monitoring of updated forecasts remains essential.

Several major LNG projects have come online or are advancing. How will new capacity, particularly from the United States and Qatar, affect global gas prices in 2026?

Large-scale projects in Qatar and the United States are expected to contribute to a convergence in global gas prices. Forecasts suggest that the relative gap between US gas prices, which are typically lower due to abundant domestic supply, and prices in Asia and Europe will narrow to its smallest level since 2020, when demand collapsed during the pandemic.

In short, record US LNG shipments are expected to lift domestic prices while putting downward pressure on prices abroad.

Unlike oil, gas markets exhibit much wider regional price disparities due to transportation constraints. Oil can be shipped directly, while gas must be liquefied before being transported across oceans. Expanding LNG capacity should help reduce these regional price gaps.

Geopolitically, 2025 saw volatility linked to the Middle East, Russia, and West Africa. Which regions represent the greatest risk or opportunity for supply stability in 2026?

Peace talks between Russia and Ukraine will be a critical factor to watch. Donald Trump has pushed for a peace agreement without success and has repeatedly threatened to withdraw support for Ukraine.

If such threats were carried out, Europe and Ukraine would struggle to withstand Russia on their own, potentially leading to a peace deal favorable to Moscow. This, in turn, could result in the lifting of sanctions on Russia’s oil sector, boosting global supply and exerting downward pressure on oil prices.