WEALTH

THE 2026 OIL MARKET:

What We Know And What Matters Now

ADAM FERRARI - CEO, PHOENIX ENERGY ONE, LLC

If you are an independent operator who has spent enough time in oil and gas in the United States, you’d have learned not to anchor your strategy too heavily on oil price forecasts. You’d pay attention to them, but you build your business to be able to operate across a range of prices, including sudden declines in price in what is a volatile industry.

As 2026 began, oil forecasts and futures pointed to an overall softer price environment. Oil supply was relatively strong, and demand had eased compared with previous years. A Reuters survey in December 2025 put Brent crude in the low-$60s. Although that’s not a distressed price, for most operators, it does leave very little margin for error.

Over the past spring, though, changes in key oil exporting regions added a new layer of uncertainty to the global oil production. By early March, concerns surrounding Iranian exports and shipping disruptions in key Middle Eastern trade routes were contributing to upward pressure on global crude oil prices. Several market observers, including major financial institutions and energy analysts, warned that supply disruptions could tighten the market further if geopolitical tensions escalated. In the weeks that followed, ongoing concerns regarding the Strait of Hormuz helped support elevated crude oil prices and increased market volatility.

Industry experts came into the year expecting a softer pricing environment, but this year’s events are a reminder that global oil markets can tighten when even a small portion of production and supply is disrupted.

Supply and demand are at play here. Oil ultimately sells at the price the market is willing to pay. When there’s more supply than demand, the pressure increases for operators. But when there’s less supply unexpectedly, inventories draw down, and the market reminds everyone how sensitive the global system really is.

Oil and gas are one of the most cyclical commodity markets to exist. Cyclical markets tend to favor companies built to operate across cycles, specifically with respect to volatility of commodity prices. Operators who can operate a successful business in a $60 oil environment are likely in a better position when pricing conditions change.

Why Capital Discipline Matters

Oil prices will move. They always do.

In an uncertain price environment, the real question for operators is simple: does your business remain profitable if prices don’t stay high? If the economics only make sense at higher prices, the margin for error is thin. That is why disciplined underwriting matters. For oil and gas operators, disciplined underwriting means being conservative and efficient at every step of the oil production process, including the exploration, acquisition, development and production of oil and gas.

The operators that have historically lasted across cycles usually do a few things well. They keep costs under control, protect their balance sheet, and focus on areas where geology is understood and infrastructure already exists. In proven oil regions, how fast you develop can matter just as much as the commodity pricing itself.

Many operators hedge a portion of their future production, and locking in at a certain price point helps limit downside while still preserving some upside if prices go up with respect to unhedged production. Hedging does not eliminate price risk, but it gives operators more control in the event prices decline in the short term.

Over time, the domestic US oil and gas industry as a whole has become more operationally efficient. Improvements in drilling efficiency and field execution have lowered breakevens across much of the sector. These industry improvements matter because they give operators more room to make good capital decisions.

Balance sheet discipline matters just as much. Leverage through the issuance of debt can help fund capital expenditures in strong markets, but that same leverage can also create real pressure when oil prices decline. In my view, durability matters more than speed. When markets shift, cost structure and financial flexibility determine whether an operator has the structure to produce at the given price.

What Durability Looks Like

In a cyclical industry where supply and price will inevitably change, the advantage belongs to operators who plan for the volatility and build their operations for the long term to be able to survive softer prices.

For an operator to be able to have success in any pricing environment, it starts with how they are structured. Trying to predict the next move in oil price is not a strategy that will survive the cycles to come. I believe that what matters most for operators is having a cost structure they can control, carefully managing short term price exposure, and keeping a balance sheet with assets that gives you options when the market tightens.

A disciplined cost structure can feel conservative when the market is strong. A disciplined operator may not appear to move as fast as everyone else. But when conditions change, a disciplined operator is not forced into bad decisions just to stay afloat. Operators that have been built around disciplined principles related to cost structure, fixed capital expenditures and asset acquisition tend to survive through the cycles and sometimes even come out stronger after individual cycles have passed.

Adam Ferrari is CEO at Phoenix Energy. He has nearly 20 years of experience in the oil and gas industry, following receipt of his bachelor’s degree in Chemical Engineering, magna cum laude, from the University of Illinois at Urbana-Champaign. He began his career with BP America in the Gulf of Mexico, then spent a stint in investment banking at Macquarie Capital, before transitioning back to the operating side with then-startup Halcón Resources Corporation. Following his tenure at Halcón, Adam pursued entrepreneurial opportunities in the mineral-acquisitions side of the oil and gas industry, which ultimately led him to Phoenix Energy.

The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views of the author’s employer or any affiliated organizations.