SunSirs: Intensifying Oil Market Dynamics Amid Loose Natural Gas Supply-Demand Conditions

The China National Petroleum Corporation Economic and Technical Research Institute (CNPC ERIC), a national high-level think tank, released its latest forecast: By 2026, the global oil market will undergo dynamic shifts between “over-supply realities” and “geopolitical conflict risks,” with Brent crude prices likely stabilizing between $60 and $65 per barrel. The global natural gas market will see a rebound in demand growth, with supply increases outpacing demand growth.

Supply-Demand Fundamentals and Geopolitical Conflicts Drive International Oil Prices

“International oil prices have declined for three consecutive years, with the average price of Brent crude futures in 2025 reaching $68.19 per barrel—the lowest in the past five years,” stated Wang Haibo, Director of the Petroleum Market Research Institute at CNPC Economic and Technical Research Institute.

Looking back at 2025, the global oil market was primarily driven by supply-demand fundamentals, shifting from a tight balance to a significant surplus. Geopolitical conflicts provided only temporary support for oil prices but failed to reverse the downward trend.

Looking ahead to 2026, Wang Haibo forecasts that under fundamental market conditions, the average price of Brent crude futures will range between $60 and $65 per barrel. Geopolitical conflicts will be the market's greatest variable; should they dominate, this benchmark could climb to $70–75 per barrel.

Specifically, global oil inventories may continue their upward trajectory, thereby suppressing the central price level of international oil. Wang Haibo noted that although OPEC+ (the oil-producing nations alliance) has decided to extend its production freeze into March this year, considering output from other nations, global oil supply is projected to increase by 1.3 million barrels per day in 2026, ultimately reaching 106.3 million barrels per day. On the demand side, global oil demand is projected to reach 104.3 million barrels per day in 2026, with growth rates remaining largely unchanged from 2025.

How will the Federal Reserve's monetary policy impact the oil market in 2026? Wang Haibo indicated that while markets anticipate at least two Fed rate cuts totaling 50 basis points, leading to further depreciation of the U.S. dollar index, this is unlikely to provide effective support for oil prices.

Domestically, China's crude oil production reached a record high of 216 million tons in 2025 and is projected to stabilize around 200 million tons in 2026. On the consumption side, total domestic oil consumption will remain largely stable in 2026, though its structure will continue to adjust. Driven by increased demand for chemical feedstocks from new projects such as ethylene and paraxylene (PX), annual oil consumption is projected to reach 765 million tons, a 0.4% year-on-year increase.

Global Natural Gas Market Supply and Demand Trends Toward Easing

According to the “2025 Domestic and International Natural Gas Market Review and Outlook” released by the China National Petroleum Corporation (CNPC) Economic Research Institute, the global natural gas market underwent significant changes in 2025, exhibiting a pattern of “tightness followed by easing.”

In 2025, influenced by factors such as the cold snap at the beginning of the year, the disruption of Russian-Ukrainian pipeline supplies, and geopolitical conflicts, international gas prices ended their two-year downward trend and began to rise. Since the second half of the year, the slowdown in global economic growth and the increase in LNG liquefaction capacity have eased market tensions. Gas prices in Europe and Asia have turned downward year-on-year, while U.S. gas prices have continued to rise, supported by LNG export feedstock demand.

“In 2026, the global natural gas market will see a supply-demand balance with increased supply exceeding demand growth, and international gas prices will enter a downward channel,” said Duan Zhaofang, Director of the Natural Gas Market Research Institute at CNPC's Economic Research Institute. Demand growth is expected to rebound, while supply growth will outpace demand growth, initiating a downward trend in international gas prices." Duan Zhaofang, Director of the Natural Gas Market Research Institute at CNPC Economic Research Institute, stated that thanks to active exploration and development by international oil and gas companies supporting production growth, global natural gas production is projected to reach 46 trillion cubic meters in 2026, representing a year-on-year increase of 1.8%.

From the domestic market perspective, natural gas consumption is growing steadily with broad medium-term prospects. In 2025, China's natural gas consumption reached 432 billion cubic meters, with transportation gas consumption growing at over 10% and industrial and power generation gas consumption steadily increasing. Duan Zhaofang projected that domestic natural gas consumption will remain between 450 and 455 billion cubic meters in 2026, reaching approximately 550 billion cubic meters by 2030.

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