We are seeing a tale of two oil forecasts playing out once again.
Don’t act too surprised. After all, there has been a battle raging between OPEC+ and the IEA to control the oil narrative for years. At times, this showdown has gotten downright brutal.
Given how crude prices have languished all year as hype over a supply glut was pushed to new levels, it’s clear that the bears have been in the driver’s seat of this market for a long time.
Here’s the catch… that supply glut has yet to materialize in the United States. Perhaps the IEA can take a quick look on this chart of U.S. crude stockpiles and show us where that glut is:
After a 3.4 million-barrel draw reported for last week, U.S. commercial crude oil inventories (excluding the SPR) are currently sitting at 424.2 million barrels — roughly 5% below the 5-year average.
To put a little perspective on this amount, that’s about 1.4% lower than where it was a year ago, and approximately 5.3% lower than it was in 2023.
Granted, we’re not counting the additions to our strategic reserve due to the fact that the Biden administration halved it in a desperate attempt to lower surging oil prices back in 2022 after Russian tanks rolled into Ukraine.
Keep in mind that U.S. demand for petroleum products hasn’t stalled — it’s still climbing, slow and steady.
Now here’s the interesting part…
You and I both know that crude prices simply cannot sustain themselves below $60 per barrel. Crude this cheap is well below the average breakeven price for drillers in the Permian Basin, which has been the dominant driver for U.S. oil production growth.
So we have healthy demand, dirt-cheap prices that discourage new drilling across the sector — I’ll let you take a guess where this will lead us in 2026.
Looking at the latest Short-Term Energy Outlook out of the EIA, U.S. domestic oil output is expected to remain flat next year at 13.6 million barrels per day. This is on the back of several strong years that saw our crude production grow from 12.9 million barrels per day in 2023 to 13.8 million barrels per day earlier this year.
Current projections from the EIA are that U.S. oil production will average 13.6 million barrels per day in both 2025 and 2026.
Folks, the cracks that we’ve been waiting for in U.S. supply growth are finally starting to emerge in 2026.
Why is that so important? Well, it’s because major forecasts like the one out of the IEA are relying on U.S. tight oil production to play a significant role in non-OPEC supply growth.
Remember, the IEA just admitted that its previous assertion that global oil demand would peak by 2030 was nothing more than a lie. The permabears at the IEA went even further to state that global oil demand would continue growing to 2050 — and they’re still underestimating things!
Shifting to OPEC’s most recent oil outlook, the group now sees strong global demand growth over the medium-term. Here’s a look at those projections, which have global oil demand rising to 113.3 million barrels per day through 2030:
Is OPEC a bit too bullish in their forecast? Perhaps, but their bullish sentiment feels more realistic than the IEA’s bearish one.
Supply-side shocks are looking far more likely in 2026.
But hey, don’t worry, OPEC and its allies are more than willing to take control of the global supply once again.
The supply/demand picture isn’t the only bullish driver ahead for oil prices, either.
For most of 2025, the conflict that has raged between Israel and Hamas served more of a red herring for crude prices. The fighting that has occurred since October 2023 put a serious risk premium on oil prices.
That’s not too surprising given that any geopolitical clash in the Middle East sends the market into a frenzy over potential supply disruptions from the world’s largest OPEC producers.
Of course, you and I both knew that kind of supply disruption would never materialize. Any significant threat to global supply would’ve sent developed nations headfirst into the fray.
Just a few days ago, the UN Security Council approved the U.S. plan for a Gaza stabilization force and its ceasefire plan.
But again, our eyes were never focused on this conflict as a driver for oil prices in 2026.
For that, we need only look a few thousand miles to the north in Ukraine.
Unleashing Geopolitical Hell in 2026
Like clockwork, crude prices will fall on any peace deals reached between Russia and Ukraine.
The thinking goes like this…
Ending Putin’s ongoing war against Ukraine would send a flood of Russian crude onto the market. After all, Russian oil is being held back from U.S. and EU sanctions, G7 price caps, and the more recent pressure on Russian oil customers like India and China.
That may not be entirely wrong considering the sharp increase we’re seeing in “oil on water” inventory. I’ve seen some estimates suggest that up to 48 million barrels of Russian crude is stranded on tankers at sea.
Both India and China have been taking full advantage of the situation for the past three years by buying Russian crude at a steep market discount.
So any peace between Putin and Zelensky could certainly put short-term bearish pressure on global supply.
However, there’s a few things we need to keep in mind. For starters, that sharp discount that countries like India and China have enjoyed would evaporate once price caps were lifted.
We already know that global demand is not only healthy, it’s strong — both the IEA and OPEC see the world’s thirst for more oil climbing through 2050. If the fundamentals tighten in 2026, we’ll see crude prices rally.
At some point you need to ask yourself whether the peace deal will ever come to fruition, too. The latest 28-point peace deal drafted by the Trump administration is a shot in the dark, with Zelensky having to make far too many concessions.
The point is, this won’t be negotiated overnight.
And the longer we wait, the more this crude sell-off looks premature.
Now let’s shift focus to another linchpin of oil-price volatility in 2026: U.S.–Venezuela tensions.
The renewed standoff between Venezuela and the United States carries with it the potential to destabilise global crude markets — not because Venezuela is a swing-producer on the scale of Saudi Arabia, but because its marginal capacity and alliances raise asymmetric risk that oil markets hate.
Venezuela’s parliament just approved a 15-year extension of its oil-producing joint ventures with Russian companies — an energy alliance rooted until 2041. Alongside this news, the U.S. has publicly flagged potential military actions against Venezuelan facilities tied to both drug-trafficking and state-run energy production.
Keep in mind that even though Venezuela’s oil industry is rife with corruption and production has fallen off a cliff since Chavez took over, it is still a vital source of heavy crude for countries like China.
If Washington keeps escalating the situation, or if Caracas responds by closing ports, shutting production, or pivoting supply chains toward the Russia-China axis, the impact will be felt among the incremental barrels that move the delta between surplus and deficit in 2026.
I know it feels safer to write that consensus for 2026 is notably bearish — analysts at Goldman Sachs project WTI prices to average $53 per barrel next year, but that forecast assumes ‘business as usual’.
It fails to price a disruption in Venezuela of even a few hundred thousand barrels per day — which might sound trivial relative to global flows, but not trivial when markets are already finely balanced.
We’re just one target on a Venezuelan port facility away from spiking prices. Maduro may be saber rattling like usual, but nobody can deny the psychological ripple that has occurred from President Trump’s aggression against cartels in South America.
In 2026 the oil market won’t be shaped solely by tighter supply and demand fears. It’ll also come from the geopolitical tensions that have persisted over the years.
That’s where price shocks start — quietly, then loudly, and always unexpectedly.
To understand where oil is heading in 2026, it helps to look back at the quiet, uneasy stretch that began in 1978 and snowballed into an energy crunch.
It started as a scattered supply tightness — regional outages, rising inventories anxiety, and DOE warnings that refineries were feeling pressure. Nothing dramatic at first. Just enough discomfort to make people pay attention.
Then the oddest thing happened.
Instead of growing more concerned, the public relaxed.
Supplies steadied just long enough for everyone to convince themselves the scare was over. Beneath that calm, however, the problems were compounding.
Through late 1978 and into early 1979, international tensions and falling Iranian exports further tightened market fundamentals. By the time the crisis fully hit in 1979 — with lines stretching around the block and rationing debates raging in Congress — the fuse had been burning for months.
That’s the parallel that matters today.
Crude prices spent most of 2025 languishing in the mid- to low-$60s, and yet markets treated it as proof that global oil demand was finally topping out; that the world was flush with oversupply.
Unfortunately, the numbers refuse to cooperate with that narrative.
Here in the U.S., demand is rising across gasoline, diesel, jet fuel, and petrochemical feedstocks. And we’re guzzling up roughly 21 million barrels of petroleum products every day.
Meanwhile, global consumption is not only holding steady above 104 million barrels per day — it’s climbing!
Even the permabears at the IEA are forced to admit that global demand will continue growing through 2050.
Not 2030.
Not 2035.
2050.
It’s not just the bulls that are optimistic over future demand growth.
Sure, OPEC has raised its 2026 demand forecast. But despite the fact that OPEC’s previous projections proved more accurate than the IEA’s, we cannot ignore the fact that OPEC members are the antithesis, the permabulls in global oil markets.
Even JP Morgan analysts see growth stretching well past the IEA’s estimates. Inventories aren’t ballooning, and countries like China and the U.S. are ready to fill their strategic reserves.
Freight and airline activity are accelerating. And efficiency gains — not price spikes — are the secret key keeping U.S. output growing.
This is the 1978 moment of false reassurance: A lull that looks like stability… but isn’t.
The fuse is burning again, quietly and steadily.
The Must-Own Oil Stocks for 2026
If the upstream side of the oil industry feels the pain of cheap crude, you can bet that the downstream side enjoys every minute of it.
Think about it..
Refiners buy oil, they don’t sell it. And the cheaper their feedstock is to purchase, the wider their margins — but only so long as demand for finished products stays firm.
And as we both know, demand isn’t just firm — it’s surging.
The United States alone consumes more than 20 million barrels per day of refined petroleum products.
Globally, the picture is the same: More mobility, more freight, more aviation, more chemicals, more energy-hungry infrastructure…. More, more, more!
And refiners are sitting in the sweetest spot in the entire value chain.
They’re buying crude at bargain-bin prices, turning that crude into the fuels the world cannot live without. And they’re doing it at a moment when demand forecasts — even the bleak ones — show nothing but growth for decades.
Some of the best refiners in the U.S. are considered must-own own stocks for 2026, and should hold a position in any diversified portfolio:
- Valero Energy (NYSE: VLO) — America’s refining backbone. Nobody pivots faster, runs cleaner, or captures margin spikes more efficiently.
- Phillips 66 (NYSE: PSX) — A hybrid refining-midstream-chemicals powerhouse that thrives in high-volume, high-complexity markets.
- Marathon Petroleum Corp. (NYSE: MPC) — The largest U.S. refiner, armed with scale, integration, and the ability to mint cash when feedstock is cheap.
The investment herd often chases upstream drillers when oil is low, thinking a rebound will save them.
However, the hidden winners during cheap-crude cycles are almost always the refiners. In fact, each of these must-own oil stocks have performed admirably throughout 2025.
They turn low prices into high profits, quietly, steadily, and at a massive scale. In other words, their risk is capped, but their upside isn’t.
The Hidden Oil Gems Lead to Enormous Profits
Some more good news is that this story doesn’t end with downstream strength.
Another, quieter group of oil stocks in a win-win position are the lean, hyper-efficient drillers that have rewritten what it means to operate in the U.S. shale patch.
For years, shale was a debt-fueled frenzy. Companies would drill fast, and drill everywhere, whether prices justified it or not. If they didn’t have the capital for that drilling frenzy, companies would take on mountains of debt — all to get as many holes as they can in the ground.
Today, that era of the U.S. oil boom is dead.
And the sooner you realize that the real value is found in those disciplined oil companies betting on engineering gains, the sooner you’ll see the real winners ahead. The survivors are the companies that learned discipline.
For us, it sounds pretty obvious.
However, the results have reshaped the entire U.S. production outlook.
Wells that once took a month to drill now take a week. Multi-well pads that once required enormous crews now run on lean teams with advanced automation.
Longer laterals, higher-intensity completions, improved reservoir modeling, and precision targeting have allowed these companies to keep U.S. output climbing even while crude prices stayed low.
If oil stays cheap, they remain profitable because they’re the ones still able to turn a profit from efficiency gains.
If oil surges in 2026, their cash flow turns parabolic.
Win-win.
And still, the market hasn’t priced this in. The herd is still living in the hangover of the 2025 supply-glut narrative.
It’s the warning bell ringing right now in the oil sector.
And those who hear it now are the ones who stand to gain the most when the fuse finally reaches the powder.
Go ahead and take a look at this one for yourself.