Energy Market Update: January 2026

The Shipley Energy Commercial Solutions Team is excited to share the January Energy Market Update to inform you of trends, weather, and other factors impacting the energy market.

Read the December 2025 Energy Market Update ->

Skip to:

• Petroleum Update
• Electricity Update
• Natural Gas Update

Petroleum & Refined Products

Energy markets remained quiet heading into year end, expect volatility to pick up in January:

The WTI crude and RBOB lows have held since our last note. Over the past 13 of 14 years, WTI crude has rallied during the final two weeks of the year, typically reflecting a seasonal short-covering rally that often coincides with the equity markets’ “Santa Claus rally.” On average, refined products tend to bottom seasonally in December, while crude oil seasonally bottoms more often in February. That said, there are many crosscurrents pulling and pushing on hydrocarbon energy markets. For example, a prominent bearish theme is the exceptional amount of global crude oil supply currently on hand, which is partly being offset by growing economic demand and ongoing, albeit tempered, geopolitical risks involving Russia, Ukraine, and Venezuela.

In regard to Venezuela, the US is selectively rolling back sanctions and oil sales to the US to begin immediately. 30-50 millions bbls would be the first tranche of sanctioned oil which is around ~3 months of sanctioned supply or 1 month of total supply. Venezuela is pumping around 500K-1M per day and would need $50-100B of investment to get up to 2-3Mbbls per day. For contrast the US is pumping ~13M bbls per day and total global supply is estimated at 83M bbls per day. The point being, although Venezuela has some of the largest reserves in the world, the amount of time to achieve 2-3M bbls per day is significant while early estimates expect an increase of yields of 300K bbls per day over next 1-2 yrs. Our view is that Venezuelan oil is not expected to “flood” the already oversupplied global market and that OPEC to counter supply swings but adds to the already bearish market sentiment.

The hydrocarbon energy complex has also fallen out of favor among investors, though we believe that in 2026, Wall Street will begin to rebalance and increase allocations to S&P 500 energy names, which could have an indirect positive effect on futures prices. On the contrary, 2026 is an extremely important year, as midterm elections take place in the fall. Although a new Fed chairman will be nominated—who is expected to maintain downward pressure on interest rates—inflation will need to remain contained, as we know fuel prices are one of the most prominent “kitchen table” issues on the campaign trail. Our consensus view is that we expect shorter-term rallies but do not anticipate sustained moves in crude oil above $70.

We expect equities to experience sell-offs in Q1, with typical seasonal February weakness, which could finally push WTI crude below the $50–52 per barrel level and drive RBOB into the $1.55–1.74 and HO $1.71 – 1.89 area. Most bear markets typically end with a crescendo washout, and depending on market volatility, the low $40s range is certainly not out of the question, given how quickly volatility and gamma risk can accelerate, driven by large commodity trading advisors (CTAs) and hedge funds. When you consider historical context, RBOB in the mid-$1.50–1.75 range and ULSD (HO) at $2.15 are significantly below their 20-year averages. Based on historical trends, the 20-year average range for RB is $2.20–$2.40, while for HO it is 2.40–2.70. Use these averages as upside resistance targets for the first half of 2026.

Institutional sentiment:

2026 Oil Market Surplus Expected: Both UBS and Goldman Sachs anticipate a significant supply surplus in 2026 (up to ~1-2mb/d or more), driven by non-OPEC growth and potential OPEC+ production increases, pressuring prices downward amid subdued demand growth.

• Bearish Price Forecasts for Brent: UBS lowered its 2026 average to ~$62/bbl (from higher prior estimates), expecting lows around $60/bbl early in the year; Goldman recommends shorting spreads, forecasting averages in the mid-$50s due to the “last big supply wave.”
• WTI Forecast Lower: UBS projects ~$58/bbl average for WTI in 2026; overall market consensus aligns with prices in the high $50s to low $60s.
• Geopolitical Risks Provide Upside Potential: Disruptions (e.g., Russia, Venezuela, Iran, Middle East tensions) could support prices or cause spikes, but OPEC+ spare capacity (~4mb/d) is seen as capping major rallies.
• Downside Risks from Positioning and Demand: Extremely bearish investor positioning and slower non-OPEC+ restraint could push prices into the mid-$50s, though improving balances later in the year offer limited recovery.
• Longer-Term Stability: Beyond 2026, slowing non-OPEC supply growth supports higher prices above $70

Contact Shipley Energy ->

Electricity Market Update

Natural gas prices rose to $4.687/MMBtu in January—up from $4.424 in December and significantly higher than last year’s $3.514—driven primarily by weather forecasts predicting a major cold outbreak from mid-January to early February

• January 2026 NYMEX expired at $4.687/MMBtu.
• Working natural gas storage totaled 3,375 Bcf as of December 26, 2025. Levels fell by 38 Bcf from the prior week, sit 55 Bcf below the amount stored a year earlier, and remain 58 Bcf higher than the five-year average. Overall, current storage is still within typical historical ranges.
• In EIA’s Short-Term Energy Outlook, future forecasts are updated based on actual weather and prices. They are stating that retail natural gas price for the residential sector has surpassed their initial forecasts, as shown below.
  
• Early-January forecasts have turned colder, boosting expected heating demand even though temperatures remain seasonally normal. Weather trends are now outweighing broader economic factors, with small forecast shifts triggering sharp price moves. A sustained cold spell hasn’t arrived, but the cooler outlook alone has lifted sentiment. For now, weather is once again the dominant driver of short-term natural gas prices as traders await clearer January signals.
• Per our WeatherBELL analytics reports, a 2-3 week period with a major cold outbreak is expected from mid-January to early February, really upping the ante for winter. Western warmth coming out has forced more warmth into the nation’s midsection, as shown below.
  
  
• Early-January gas demand is set to firm as colder weather lifts heating load and LNG facilities run near capacity. Steady export flows now provide a reliable demand floor during cold periods. But near-record production and normal storage draws keep the supply side well-balanced, capping major upside. With fundamentals tight but not stressed, price action remains highly reactive to marginal shifts in weather, export volumes, or output.

Factors impacting the natural gas markets currently:

• We are now in withdrawal season and our biggest drivers for price volatility are weather and production rates
• Recent volatility has been attributed to weather forecasts which impact demand, and storage injections.

Action Advice

We recommend checking in frequently with your account manager.
Other rate options include Basis Only or NYMEX Lock deals to separate the two elements of your natural gas supply price to look for potential value vs standard Fixed pricing. For those who want to float their NYMEX, consider a cap and floor structure to economically manage your risk. Ask your Account Manager for details.

January 2026 Natural Gas NYMEX Settlement Price: $4.687/MMBtu
Last month: December 2025 Natural Gas NYMEX Settlement Price: $4.424/MMBtu
Last year: January 2025 Natural Gas NYMEX Settlement Price: $3.514/MMBtu