Oil & Gas

S&P Global Commodity Insights has sounded an alarm over the anticipated downturn in the U.S. oil industry, projecting a decline in oil production by 2026. According to its updated short-term outlook, U.S. oil output will decrease to 13.33 million barrels per day in 2026 after peaking at 13.46 million barrels per day in 2025. The decline is attributed to slowing global demand, trade uncertainties, and an expected oversupply in the market. Demand growth forecasts have been sharply revised downwards, with S&P now expecting only 750,000 barrels per day growth in 2025 a 500,000-barrel cut from earlier predictions. This downturn comes after a strong first quarter, but demand in subsequent quarters is expected to weaken significantly due to sluggish economic performance in key markets like China and the OECD region.

From a business perspective, U.S. oil and natural gas producers face a tough environment characterized by weaker demand and increased global supply. Ian Stewart from S&P emphasized that tariffs and geopolitical tensions, especially with China, are stifling demand growth prospects. On the supply side, OPEC’s unexpected policy shift to accelerate output increases competition for U.S. producers. With OPEC still holding significant spare capacity, further output hikes are possible, exerting more downward pressure on oil prices. This oversupply could make U.S. onshore production less competitive, as it is less price-responsive compared to OPEC+ producers, further challenging profitability for American oil companies.

Geopolitically, the predicted decline in U.S. oil output marks a potential pivot point for the global energy market. Since 2022, U.S. production growth has been a key driver of global oil dynamics. A reversal in this trend could open the door for OPEC+ to regain market dominance, especially if they continue to increase production aggressively. While a price driven decline in U.S. output could stabilize or even push oil prices upward in the long term, much will depend on how severe the global economic slowdown becomes. If demand falters beyond 2025, the oil market could face prolonged volatility. The current uncertainty in U.S.-China trade relations further complicates the outlook, making the energy sector highly sensitive to geopolitical developments in the coming months.