Rystad sees energy oversupply, lower prices and rising M&A opportunities in 2026
Friday, December 19 2025 - 07:56 AM WIB
By Romel S. Gurky
Global energy markets are heading into a year of oversupply, softer prices and heightened geopolitical risk in 2026, creating favorable conditions for mergers and acquisitions while slowing the pace of the energy transition, according to a new outlook from Rystad Energy.
In its annual energy forecast released on Dec. 18, the independent energy research firm said upstream energy abundance next year is likely to depress primary energy prices, even as bottlenecks emerge downstream in refining, power and infrastructure.
“A year of upstream energy abundance lies in store in 2026, but with potential bottlenecks downstream,” Rystad said, adding that deeper price declines in 2026 could set the stage for a rebound in 2027–2028, making next year attractive for acquisitions and greenfield project contracting.
Rystad expects global primary energy consumption to rise by around 2,500 terawatt-hours (TWh) in 2026, although only about 1,550 TWh will translate into useful energy. Of this growth, 900 TWh will be carried as electricity, entirely supplied by renewables, while gas will dominate growth in energy molecules, accounting for about 60%.
On the supply side, oil markets are forecast to face the largest surplus. Rystad estimates that up to 3.2 million barrels per day (bpd) of additional oil could enter the market if OPEC+ unwinds its voluntary production cuts. Even with China expanding its strategic crude stockpiles, the market is likely to remain oversupplied, forcing OPEC+ to choose between extending cuts or tolerating weaker prices.
Despite softer oil prices, refinery margins are expected to remain strong in 2026 as global refinery utilization rises. Rystad said capacity growth is lagging demand growth, compounded by ongoing refinery closures in Europe and the US. Diesel supply risks in Europe and gasoline supply pressures on the US East Coast are expected to support elevated crack spreads through much of next year.
US shale oil production is also expected to prove resilient, even with West Texas Intermediate (WTI) prices hovering near the $60-per-barrel breakeven level. Rystad noted that productivity gains from longer lateral wells and operational efficiencies are allowing producers to defend output levels, while consolidation through mergers could help offset cost pressures.
Read also: Global FLNG capacity to triple by 2030, Rystad Energy reports
In gas markets, a surge of new liquefied natural gas (LNG) supply—around 30 million tonnes in 2026—will loosen global balances, driven mainly by North American projects. Asia is expected to absorb much of the additional volume, although commissioning risks, weather-driven demand swings and geopolitical tensions will continue to inject volatility.
Rystad also highlighted mounting oversupply in power markets, particularly during midday hours, due to rapid growth in solar and wind capacity. This is accelerating demand for energy storage, with battery energy storage systems emerging as one of the fastest-growing segments in the energy sector.
China is expected to play a stabilizing role in oil markets by further expanding its strategic crude inventories in 2026. With around 70% of its crude supply imported, China remains a key swing buyer, capable of placing a floor under prices during periods of surplus, even as electric vehicle adoption reduces gasoline and diesel demand.
Meanwhile, renewable energy capacity growth is forecast to slow for the first time in decades. Rystad expects new renewable additions to fall 7% year-on-year to around 650 gigawatts in 2026, largely due to policy changes in China and headwinds in the US. As power demand continues to rise, investment is expected to diversify into gas- and nuclear-fired generation.
Upstream investment discipline is expected to persist, with global exploration spending holding steady at just over $60 billion. However, nearly $150 billion worth of upstream M&A opportunities are currently on the market, positioning 2026 as another active year for consolidation, particularly in US shale and gas- and LNG-focused international assets.
Rystad concluded that 2026 will further entrench a “hybrid energy reality,” in which fossil fuels and renewables coexist across sectors, with investment decisions increasingly driven by economics rather than policy support amid a more uncertain geopolitical backdrop.
Editing by Reiner Simanjuntak