Fitch Ratings-London/Warsaw/New York-03 December 2025: Fitch Ratings has cut its 2025-2027 oil price assumptions, reflecting market oversupply. The 2026 TTF price has been increased to USD9/mcf due to tighter European gas balances. The increased 2025 Henry Hub gas assumption reflects year-to-date prices. All other base‑case assumptions are unchanged. The 2025 stress-case assumptions have been adjusted to equalise with the base case.

The short- and medium-term Brent and WTI oil price assumptions have been cut to reflect large market oversupply, with production growth exceeding modest demand increases. This also takes into account uncertainty regarding Russian volumes and OPEC+ policy after a pause in the reversal of output cuts in 1Q26. We have kept the longer-term and mid-cycle assumptions unchanged, as lower prices should begin to constrain higher-cost supply growth. Geopolitical risk will add to volatility.

We forecast global demand to grow by about 0.8 million barrels per day (mmbpd) in 2025 and 2026 due to slower economic growth, a severe downturn in the petrochemicals sector and the energy transition. The International Energy Agency (IEA) estimates that EV adoption led to global oil demand displacement of 1.3mmbpd in 2024; the pace of displacement may slow, but the trend will continue in the long term. Global oil demand showed some signs of improvement in 3Q25, growing by about 0.9mmbpd. With marginally stronger GDP growth in 2026, oil demand growth may find some support, but we still expect it to remain below 1mmbpd.

The IEA forecasts global oil supply to expand by 3.1mmbpd in 2025 and by a further 2.5mmbpd in 2026. Non-OPEC+ oil production growth contributes 55% and 48% to these increases, respectively, driven by the US, Canada, Brazil, Guyana and Argentina. We expect some moderation in non-OPEC+ production growth in 2027. Some oil and gas companies have delayed investment decisions due to oil price volatility. US oil producers need a WTI price of USD61-70/bbl to drill a new well profitably, according to the Dallas Fed Energy Survey.

OPEC+ has continued to phase out its previous voluntary production cuts. After completing the unwinding of 2.2mmbpd in September 2025, it began fully restoring its voluntary output cut of 1.65mmbpd by increasing production by 137,000bpd in October, November and December. OPEC+ announced a pause for 1Q26 given market conditions and seasonally lower demand.

Russian output remains flat at 9.3mmbpd due to sanctions. Recent US and UK sanctions on Russian oil companies Lukoil and Rosneft may have an adverse impact on volumes of Russian oil exports, as these companies account for about 50% of Russian oil exports. Most of their exports are directed to China and India. A peace deal in Ukraine, if reached, is unlikely to affect Russian export volumes in the short term.

The increased 2026 TTF gas price assumption reflects tighter European gas balances as LNG supply growth is constrained by project-timing slippage, while Russian pipeline flows remain structurally limited. Nevertheless, we continue to assume that the additional LNG liquefaction capacity coming on stream in 2026 and 2027 will exert significant downward pressure on TTF prices.

We have increased the 2025 base-case Henry Hub assumption to USD3.5/mcf and kept the remaining assumptions unchanged. US gas production growth is outstripping consumption growth, while increasing LNG exports have balanced supply and demand. We maintain our expectation of a long-term marginal price of USD2.75/mcf.

Source: Fitch Ratings