The global energy landscape is poised for significant shifts in 2026, marked by a confluence of evolving market dynamics and technological advancements. What lies ahead for energy markets, and what defining factors will shape the trajectory of natural gas and oil prices?
An unprecedented surge in liquefied natural gas (LNG) production is on the horizon. The period from 2026 to 2028 is expected to witness the most substantial expansion in global LNG liquefaction capacity in history. Natural gas traders will closely monitor the progress of U.S. LNG projects already in their initial operational phases, alongside those slated for commissioning in 2026 and 2027. This expansion is projected to significantly increase U.S. feedgas demand, and any delays could exert downward pressure on Henry Hub futures prices. Furthermore, Qatar's 4.3 billion cubic feet per day (bcf/d) North Field East (NFE) project, coupled with other brownfield expansions, will further amplify global LNG supply, impacting the price of Henry Hub and its differentials against European and Asian natural gas prices. Simultaneously, the oil market will experience a delicate balancing act, influenced by continued growth in non-OPEC supply, ongoing geopolitical tensions, and the strategic decisions of the OPEC+ alliance. Despite a dip in WTI crude oil prices in 2025, non-OPEC production, particularly from Canadian oil sands, Brazil, and Guyana, is set to expand by over 1 million barrels per day (b/d) in 2026, even as U.S. output stabilizes or declines. Sanctions against major producers like Russia and Iran have led to a substantial accumulation of oil in floating storage, with approximately 70 million barrels held at sea by November 2025. Future developments in these sanctions, whether tightened or eased, could profoundly affect oil supply and prices. OPEC+'s policy, as demonstrated by its decision to halt output increases through early 2026, remains crucial in navigating potential market surpluses and maintaining stability.
China's strategic actions will profoundly influence oil markets, despite its reduced role as a primary driver of demand growth. The nation's immense capacity to adjust its oil imports and refined product exports grants it significant market leverage. China's efforts to bolster its strategic petroleum reserves at favorable prices absorbed a portion of the global excess supply in 2025, effectively removing these barrels from commercial trade. Conversely, export quotas have restricted China's refining capacity, supporting global gasoline and diesel margins. The release of refined product export quotas by China's Ministry of Commerce (MOFCOM) in January will be a key indicator for 2026. A large quota could inundate Asian markets with inexpensive gasoline and diesel, impacting global fuel margins and influencing WTI, RBOB gasoline, and ULSD futures. Moreover, fluctuations in the U.S. dollar are expected to introduce significant volatility to energy markets. Forecasts suggest a weakening dollar in 2026 due to anticipated loosening of U.S. monetary policy and trade uncertainties. Historically, a weaker dollar has bolstered crude oil demand by making dollar-denominated commodities more affordable for international buyers. Although this correlation has softened recently, central bank announcements and economic data releases will continue to drive dollar volatility, creating ripple effects in oil prices. Traders will closely monitor these foreign exchange events, recognizing their potential to trigger substantial oil market movements.
Finally, the exponential growth of artificial intelligence (AI) infrastructure is fueling an equally explosive increase in energy consumption. Data centers, integral to AI operations, are power-intensive, with energy costs comprising a significant portion of their operational expenses. This trend is projected to elevate electricity demand by over 2% in 2026, marking the highest growth rate in more than 15 years. The ensuing scramble for power is reshaping the electricity market, creating challenges for utilities and developers grappling with turbine backlogs, regulatory hurdles, and lengthy interconnection queues. Beyond the electricity sector, AI's influence extends to the broader economy and, consequently, to oil markets. In 2024 and 2025, AI and data-center-related stocks were a dominant force in the S&P 500's returns, underscoring a tangible link between technological advancement and economic activity. Economists estimate that data center investments alone contributed 1% to U.S. GDP growth in 2025. Given the strong correlation between oil demand, oil prices, and the stock market, AI's ongoing expansion will be a critical determinant for WTI prices in 2026. Therefore, while traditional factors like OPEC+ decisions, China's policies, and geopolitical events remain pertinent, the emergence of structural changes driven by LNG expansion, dollar dynamics, and AI's energy footprint will present both new challenges and opportunities for energy traders in the coming year, demanding a comprehensive and adaptive analytical approach.