Oil and Gas Trends

Upstream Industry Highlights

California Refinery Shutdown: Valero to Lay Off Hundreds & Wind Down Benicia: What’s happening: Valero is shutting down its Benicia Refinery (California) between March 15 and July 1, 2026, with 237 layoffs announced. The refinery processes ~170,000 bpd, which is a meaningful portion of California’s capacity.
Why it matters: Refinery capacity changes can tighten regional product supply and increase gasoline/diesel market volatility especially on the West Coast.

U.S. Rig Count: Drilling Activity Remains Soft to Start 2026: What’s happening: Baker Hughes’ U.S. rotary rig count was reported at 544 rigs, down week-over-week, continuing the trend of relatively restrained drilling activity compared to recent highs.
Why it matters: Rig activity is still one of the clearest “early signals” for upstream spend, service demand, and near-term production momentum.

Carbon Capture Uncertainty: INPEX Pauses Major CCS Project Amid Regulatory Reform:  What’s happening: INPEX has paused progress on its Bonaparte CCS project while Australia continues reforms to its environmental framework (EPBC Act changes).
Why it matters: CCS is a key decarbonization pathway for LNG and upstream producers, but shifting regulations can delay investment timelines and execution.

The EIA Expects Weakening Oil Prices Through 2026 (& Into 2027)

The U.S. EIA’s newest Short-Term Energy Outlook is its first to include 2027 forecasts, and it points to a softer price environment ahead. The agency expects oil prices to decline in 2026 because global production exceeds demand, causing inventories to rise. (eia)

This outlook adds pressure on budgets, drilling plans, and service demand. Especially for operators relying on higher price assumptions.

Brent forecast: ~$56/bbl in 2026 (~$54/bbl in 2027)

The EIA forecasts Brent will average about $56/bbl in 2026 and $54/bbl in 2027, signaling a longer runway of price pressure than some companies may have built into planning.

If that pricing holds, “tier-one inventory + efficiency” becomes even more critical across U.S. shale and offshore portfolios.

OPEC+ Will Pause Planned Output Increases

Eight OPEC+ countries met virtually on Jan. 4, 2026 and reaffirmed their earlier decision to pause production increments, citing market conditions and stability. (OPEC)

Even with non-OPEC supply growth, OPEC+ supply discipline still heavily influences market sentiment and how fast inventories build.

LNG is Still The Growth Story

The IEA expects global natural gas demand growth to accelerate in 2026, supported by more LNG supply coming online (after a slowdown in 2025). (iea)

This reinforces LNG’s role in global energy security and strengthens the outlook for LNG-linked upstream and midstream assets.

Mitsubishi Made a Major Bet on U.S. Shale Gas (Haynesville) with a $7.5B Deal

Mitsubishi is acquiring Aethon’s Haynesville assets in a deal reported around $7.5B, expanding its gas footprint near Gulf Coast LNG infrastructure. (Financial Times)(upstream)

This is another signal that strategic buyers see long-term value in gas supply positioned for LNG exports.

Europe’s Growing Reliance on U.S. LNG is Becoming a Geopolitical Vulnerability

A new analysis highlighted that the EU and UK are now far more reliant on U.S. LNG imports, raising concerns that energy security could be exposed to geopolitical or trade tension. (The Guardian)

LNG pricing and supply aren’t just market issues anymore. This is now a strategic policy issue for Europe.

Bottom Line

This week’s updates point to a 2026 defined by tighter margins in oil, active supply management, and LNG-driven gas momentum with geopolitics playing a bigger role in trade and pricing than many markets expected.