Crude Oil Under Pressure as Gas Gains Ground in the US Energy Mix

Natural gas is steadily eroding oil’s dominance in the US energy mix, while global crude prices are sliding on signs of comfortable near‑term supply, with Brent around €65–€67 and WTI near €62–€64 per barrel in euro terms. US energy consumption is pivoting toward natural gas as shale output and power-sector demand grow, limiting medium‑term upside for crude despite current geopolitical and OPEC+ headlines. At the same time, global benchmarks have retreated to multi‑month lows as Middle East export flows recover, OPEC+ adds barrels for a fifth consecutive month, and demand signals out of key consumers, notably China, remain muted. Together, these trends suggest crude oil must increasingly compete with abundant, relatively cheap gas in power and industry, even as the physical oil market looks comfortably supplied in the short run.

Prices

Brent futures are trading just below USD 72 per barrel and WTI near USD 68.5, following a sharp pullback from conflict peaks above USD 110 earlier this year. Using a rough EUR/USD of 1.10, this implies Brent around EUR 65–67 and WTI around EUR 62–64 per barrel.

The sell‑off has been driven by the removal of earlier war risk premia as Strait of Hormuz shipments normalize and discounted Middle Eastern barrels hit the spot market. The move has taken prices back to, or slightly below, pre‑war levels, raising fears of a renewed supply‑led glut.

Supply & Demand

On the supply side, OPEC+ has just agreed a fifth consecutive monthly increase, with seven producers adding a combined 188,000 bpd from August. Gulf exports have rebounded as Hormuz traffic normalizes and ADNOC, among others, pushes additional volumes through discounted tenders, while Russian seaborne flows remain elevated.

Demand growth, by contrast, looks tepid. Analysts highlight weaker physical buying from China and a softening in global demand forecasts for 2026, with several agencies trimming their growth estimates. This imbalance underpins concerns that the market could face a sizeable surplus if the incremental OPEC+ supply is not offset elsewhere.

Fundamentals & the US Energy Mix

Structurally, the rise of natural gas in the United States is a critical medium‑term headwind for crude oil demand. In 2025, gas already accounted for 36% of US energy use versus petroleum’s 37%, and the gap is narrowing quickly. The US EIA expects petroleum consumption to rise just 0.6% between 2025 and 2027, while natural gas demand is set to grow 3.4% over the same period.

Gas is firmly established as the dominant fuel for US power generation, supplying more than 40% of grid electricity. Growing electricity needs from data centers, electric vehicles and broader electrification are expected to fall disproportionately on gas‑fired plants, which pair well with intermittent renewables by providing fast, flexible balancing capacity.

Abundant, relatively cheap US gas has already displaced coal in power and is reinforcing gas’s role in energy‑intensive industries, including nitrogen fertilizer production. As natural gas is on track to surpass petroleum as the country’s largest energy source before 2030, US oil demand growth looks structurally constrained, even if absolute consumption remains high.

Globally, this shift contributes to a more nuanced crude outlook: while emerging markets and petrochemical sectors still underpin sizable oil demand, the marginal barrel increasingly competes with gas and renewables in power and, over time, in parts of transport via electrification.

Outlook & Weather/Power Demand Angle

In the near term, crude prices are likely to remain sensitive to weekly inventory data and any renewed disruption risks in the Middle East. Upcoming EIA statistics and further guidance from OPEC+ on 2026 strategy will be watched for signs that producers might slow or pause planned output hikes if prices slide too far below their comfort zone.

For the balance of 2026, consensus views point to moderately lower average prices than earlier feared, with some institutions projecting Brent around the low‑to‑mid USD 80s while more bearish houses see averages closer to USD 60 if supply growth outpaces demand. High summer temperatures and strong cooling demand could offer episodic support via higher refinery runs and power burn, but this is unlikely to override the broader structural rise of gas in the US and the current perception of ample crude supply.

Trading & Risk Management Implications

• Producers: Consider layering in additional hedges on rallies back toward EUR 70–75/bbl Brent equivalent, using collars or put spreads to protect downside while retaining some upside if geopolitics tighten balances again.
• Consumers & refiners: Use current weakness to secure medium‑term coverage; backwardation has eased and incremental OPEC+ barrels limit near‑term squeeze risk, favoring staggered buying along the curve.
• Industrial gas and power users: Account for structurally firm US gas demand in forward planning; oil‑linked contracts may decouple somewhat as gas, rather than crude, drives marginal energy pricing in the US power market.

3‑Day Directional Price Indication (EUR)

• Brent (ICE): Bias slightly bearish to sideways, seen trading roughly in a EUR 63–68/bbl band, with modest downside risk if additional bearish demand data emerge.
• WTI (NYMEX): Similar tone, likely to hold in a EUR 60–65/bbl range, tracking US inventory headlines and any adjustments in OPEC+ rhetoric.
• Crack spreads: Vulnerable to pressure if crude remains weak while refined product prices lag, but strong summer demand for gasoline and middle distillates may offer some cushion.