TLDR;
Joseph Shakar from Shakar Energy Report provides a comprehensive outlook on the oil and natural gas markets, reviewing 2025 and forecasting trends for 2026. He highlights opportunities in the energy sector, emphasizing potential for significant returns due to undervalued stocks and increasing global demand. Shakar discusses factors influencing oil prices, including OPEC production, geopolitical events, and the impact of data centers on natural gas demand.
- Attractive sector for long term investments
- Natural gas is the most attractive
- Potential for significant returns
Intro [0:00]
Charlotte Mloud from investingnews.com introduces Joseph Shakar, president and author at the Shakar Energy Report, a 40-year veteran of the industry, to discuss the oil and natural gas markets, reviewing 2025 and forecasting trends for 2026.
Oil's 2025 performance [0:28]
Oil prices in 2025 were lower than initially expected due to weakening demand in the US and the impact of tariffs on global trade. Prices started the year at $79 WTI, but a correction occurred, leading to a buy signal based on three factors: oil prices falling below economic levels (around $65, but down to $54-$56), the S&P TSX energy index dropping below 240 (reaching 214), and the S&P Energy Bullish Percentage Index hitting a record low of 0%. This prompted a "table pounding buy signal" and recommendations, resulting in significant gains for several stocks.
Oil stock opportunities [4:26]
The energy sector is attractive for long-term investors, although a correction is expected in Q1. Currently, oil prices are just under $58, the S&P TSX energy index is around 298, and the bullish percentage index is at 49%. Investors are advised to hold 80% of their target energy allocation, with plans to increase to 100% upon the next buy signal. The sector offers great yields, with many companies yielding over 7%, providing both dividend income and capital gains potential. Many companies are trading at two to three times cash flow, with potential to reach eight to ten times at the cycle's peak.
Oil price outlook for 2026 [8:08]
For 2026, Q1 is expected to see oil prices between $52 and $66, Q2 between $62 and $72, Q3 between $68 and $78, and Q4 between $74 and $84. The industry cannot quickly respond to bringing on new oil due to infrastructure limitations, which will lead to a longer bull cycle. Demand is expected to grow, particularly in Asia and the non-OECD countries, driven by increased resource needs for data centers, grid improvements, and general consumption. Global demand could rise from 105.2 million barrels in 2025 to a potential 110-112 million barrels by the end of the decade.
US-Venezuela impact [13:18]
The US-Venezuela situation could impact the oil market. If American companies regain their assets in Venezuela, they could increase production, potentially affecting Canadian exports to the US. This underscores the need for additional takeaway capacity on Canada's east coast. Canada's heavy oil industry is considered less attractive due to long-term market access concerns, while light oil and natural gas are more favorable.
Supply/demand balance [16:36]
OPEC's production increases have slowed, indicating limited capacity. In November, OPEC produced 28.48 million barrels, down from the previous month. While production may increase from the US, Guyana, and offshore Brazil, demand growth could lead to a drawdown on global storage. Commercial stocks in the US are within the lower end of their 5-year range, and global onshore commercial stocks are also at the lower end of their range. The only area with excess inventory is offshore, where shadow fleets from Iran, Venezuela, and Russia are seeking markets.
Triple-digit oil prices [23:17]
Demand for oil is not just from gasoline, diesel, and jet fuel, but also from various byproducts used in plastics, pharmaceuticals, and other products. Non-OECD countries will see the biggest increase in consumption, and by 2028-2029, the industry's inability to respond with new production could drive prices significantly higher. Warren Buffett suggests oil could exceed $200 a barrel due to short supply. Infrastructure limitations, rather than discovery, will impede the product's arrival at market.
Natural gas prices in 2026 [25:57]
US natural gas inventories are declining, with recent data showing a 166 BCF drawdown. If drawdowns continue due to increased LNG takeaway and data center use, prices could regularly reach $5-$6 NAX. In Canada, LNG Canada is expected to increase demand, with potential for 6-8 BCF of incremental demand between now and the end of the decade. Natural gas stocks are currently trading at two to three times cash flow, with potential to reach eight to ten times at market peaks.
M&A activity to continue [31:29]
Mergers and acquisitions (M&A) are expected to continue in the oil and gas sector, as it is often cheaper to buy than build. Consolidation in the Montney and Duvernay regions will likely persist, along with activity in light oil plays. Deals are generally seen as positive, providing good value to shareholders. Private equity and large public players will continue to drive M&A activity, seeking to consolidate land positions and reduce operating costs.
Sector is cheap now [35:04]
Investors should have some exposure to energy, whether through conservative investments like pipelines and royalty trusts or growth-oriented companies with dividend income. The sector is currently cheap, particularly in Canada, and a correction could offer even better prices. The Canadian stocks are cheaper than the US ones. The sector is poised for growth, potentially entering the limelight in the second half of 2026.
Outro [36:53]
Charlotte Mloud thanks Joseph Shakar for his insights and looks forward to future evaluations of the market.
