Grid Strains, Price Pressure, Geopolitical Shifts

WASHINGTON, DC – JANUARY 09: U.S. President Donald Trump (C) speaks during a meeting with oil and gas executives in the East Room of the White House on January 9, 2026 in Washington, DC. Trump is holding the meeting to discuss plans for investment in Venezuela after ousting its leader Nicolás Maduro. (Photo by Chip Somodevilla/Getty Images)

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For energy, 2026 will be a year characterized by four intersecting global forces: Grids straining under skyrocketing power demands, price pressures on an array of energy related commodities, shifting geopolitical forces, and an oil and gas upstream sector forced to work harder and smarter to maintain profits. That’s the view reflected in the 2026 Energy Outlook published January 13 by big energy data analytics firm Enverus.

“2026 is a year of recalibration as capital focuses on specific winners like gas-fired generation and landfill RNG, grid operators tightening AI-driven load forecasts, and data centers move toward behind-the-meter generation,” noted Ian Nieboer, managing director of Enverus Intelligence® Research, an Enverus subsidiary.

Dane Gregoris, managing director at Enverus Intelligence® Research added, “Our work shows oil prices will reset lower in 2026 without signaling long-term scarcity. Upstream operators will continue to push for efficiency gains while capital stays highly selective.”

Dynamics in Repriced Energy Markets

In the oil sector, 2026 is expected to feature stark contrasts. Enverus projects global oil inventories to reach levels not seen since the COVID pandemic, driven by competitive price wards in U.S. shale production. This could drive prices down in the first half of the year, even as geopolitical risks introduce potential upside rewards.

The Outlook sees things improving for upstream companies in the second half of the year as demand surpasses supply, leading to inventory drawdowns and a gradual price recovery. But for the full year, Enverus projects the international Brent index price to average just $55 per barrel, well below the generally accepted breakeven price for most U.S. shale drilling projects.

The analysts believe natural gas markets are similarly poised for moderation in 2026. Enverus expects the U.S. Henry Hub index to average $3.80 per million British Thermal Units (MMBtu) throughout winter periods but softening to $3.60/MMBtu during the summer. The longer-term outlook is somewhat more encouraging, with a gradual increase to $4.00-$4.50/MMBtu expected by the end of the decade.

This projection is underpinned by some structural constraints which have limited sustained higher prices for U.S. natural gas in recent years:

• Highly responsive production growth in the lower 48 states often exceeding forecasts.
• A shift in power generation from gas to coal when gas prices rise.
• Lighter storage withdrawals due to a 150 billion cubic feet (Bcf) surplus compared to the 5-year average.
• And overall robust supply amid subdued demand.

On the supply side, the Outlook highlights emerging growth from regions previously hampered by geopolitical issues, such as Venezuela, Canada, and Russia. Enverus expects these areas to contribute significantly in 2026, helping alleviate potential mid-decade shortages even as global upstream investments continue lagging behind needs for future projects and reserve replacement. While this dynamic helps ease short-term imbalances, the longer-term outlook for hydrocarbons remains optimistic due to persistent demand drivers.

Grids Strain From AI Energy Demands

Surging demand from AI expansion and broader electrification trends will drive ongoing pressures on regional power grids across 2026. The report’s authors predict the bursting of an “AI energy demand bubble” during the year, with actual load growth in big markets like ERCOT and PJM falling short of recent projections by independent system operators. This will force downward revisions in long-term forecasts.

Regulatory reforms in some areas are curbing on-grid demand. Enverus cites policy revisions by AEP Ohio as having reduced interconnection queues by about 55% by diverting datacenters to behind-the-meter solutions. Regions like PJM, MISO, and SPP are accelerating approvals for dispatchable resources, resulting in higher reserve margins by 2030 as ISOs strive to improve grid security and reliability during major weather events. The Outlook also sees increased investor scrutiny serving to temper hyperscaler spending as companies prioritize cash flow-funded expansions over new capital outlays.

Demand by datacenter developers for reliable baseload power fueled by natural gas remains strong, but challenges persist. New-build costs have risen to $2-$3 million per megawatt (MW), with turbine acquisition lead times extending to 2.5 years plus an additional two years for construction. Enverus sees mergers and acquisitions playing a pivotal role in controlling costs here: Existing assets will command premiums as deal values hold at or above $1 million/MW due to a scarcity of operational capacity.

Obviously, renewable energy sources are under rising stress due to a combination of energy policy stresses and market factors. Enverus foresees rising bankruptcies and asset sales among wind and solar developers, which could double the levelized cost of energy (LCOE) in some areas. The report cites the bankruptcy in November of Pine Gate Renewables as a harbinger of things to come amid growing financial strains in the sector.

Conversely, Enverus sees geothermal energy as being on the cusp of a breakthrough, with pilot projects scaling to commercial operations in 2026, spurred by AI-driven load growth requiring clean, dependable power and advancements in technology that broadens viable locations. Some major oil companies are expected to announce their involvement in enhanced geothermal systems during 2026, leveraging their expertise in drilling and subsurface operations which are vital features of geothermal development.

Oil Industry Will Continue To Meet Energy Demands

Enverus sees North American E&P companies continuing to intensify efforts to improve efficiency amid declining inventory quality. The Outlook projects a surge in extended-reach drilling (ERD), with horizontal laterals exceeding three miles rising from 12% of activity in 2022 to as high as 34% in 2026. These longer laterals limit productivity losses when drilling through lower-quality rock, making ERD a core strategy.

Resource plays will continue to expand in key basins. In the Permian and Gulf Coast regions, oil-focused growth will derive from the Delaware Basin’s Bone Spring, Upper Wolfcamp, and Avalon formations. The Midland Basin will see deeper bench development, with 20% of workover programs targeting this area. Formations in the Midland Basin like the Barnett and Woodford will also see increased activity. The Gulf Coast region will lead for natural gas, with the Western Haynesville, West Eagle Ford, and South Haynesville creating the most volume growth and providing the lion’s share of additional supplies for the expanding LNG industry.

A Useful Reminder About The Nature Of Energy Markets

Overall, the 2026 Energy Outlook serves as a useful reminder that energy markets do not bend easily to the will of ideological pressures or over-hyped forecasts. These markets mainly respond to price signals, technological advances, geopolitical developments, and unrelenting demands for secure, affordable energy supplies. It’s bad news for activists and politicians, but good news for most everyone else.