Beyond Geopolitics: The Structural Forces Driving Energy from 2025 into 2026

Energy in 2025 traded like a two-track world: oil priced a surplus cycle (even when geopolitics tried to scare it higher), while U.S. natural gas priced a domestic balance that repeatedly flipped between “too much supply” and “LNG + winter demand drains the system.” The two broad commodity indices largely mirrored that reality because both are energy-sensitive thermometers, especially the S&P GSCI, which is structurally heavier in oil-related exposure than most diversified baskets.

1) Brent crude in 2025: geopolitics spiked the tape, but supply policy wrote the ending

The Brent chart captures the year’s core paradox. There is short, sharp rallies driven by sanctions and Middle East risk, but the dominant trend is lower because the market kept returning to the same clearing price logic: expected supply growth greater than expected demand growth.

The year opens with a quick upside burst (+9.96% over ~15 days), a classic “risk premium injection.” Early-2025 crude was still sensitive to Russia/Iran policy headlines and enforcement risk, and the front of the curve reacts fast when traders believe barrels might get stranded or rerouted. But what matters for the rest of the year is that this bid did not convert into a persistent deficit narrative.

The first structurally important leg is the drawdown into early May (-26.69% into May 5 on the chart). That move lines up with the moment the market stopped debating “tight vs balanced” and started pricing “more barrels are coming.” Reuters reported Brent settling around $60 and noted the selloff was driven by OPEC+ expediting output hikes against an already uncertain demand outlook, explicitly stoking fears of rising supply. (Reuters) This is the key: once OPEC+ policy credibility shifts from “defend price” toward “restore volumes,” the market’s default becomes surplus unless demand surprises higher.

The mid-year rebound (+30.50% into June 19) is the purest geopolitical impulse of the year. The June window coincides with the Israel–Iran escalation headlines and the policy choreography around Iran, enough to lift implied disruption risk, but not enough to prove sustained supply loss. Reuters’ June 20 reporting shows Brent around the high-$70s while the market processed new Iran-related U.S. sanctions and the evolving probability of deeper involvement, exactly the kind of situation that boosts risk premium but struggles to create a durable physical deficit unless shipping/production is materially hit. (Reuters)

Then the second structural leg dominates: the extended H2 downtrend (-25.24% over ~195 days on the chart). This is where oil in 2025 behaves like a market that believes in surplus clearing. The logic chain is consistent: (1) OPEC+ supply normalization continues to loom, (2) non-OPEC supply remains resilient, and (3) demand expectations stay vulnerable to global trade uncertainty and late-cycle growth moderation. Even when geopolitics pops prices, the market repeatedly fades it if inventories don’t tighten and if forward balances still look comfortable.

2) U.S. natural gas in 2025: the LNG era made the market more “elastic,” not less volatile

The NYMEX NG chart is a great illustration of how the U.S. gas market has evolved. In older cycles, gas volatility was mostly weather + storage. In 2025, it’s weather + storage + LNG export pull + record production, and the interaction makes the price response more nonlinear.

The Q1 rally (+47.53% into March 10) fits a regime where the market is sensitive to late-winter balance risks and storage outcomes. The EIA itself highlighted how volatility dynamics changed through 2025 and explicitly discussed the role of major cold events earlier in the year (including the kind of winter shock that forces rapid repricing of short-term balances). (Reuters)

But the real story is what happens next: the long grind lower into late August (-39.97% into Aug 25). That leg is almost impossible to explain without the supply side. Reuters (citing EIA expectations) described 2025 as a year of record U.S. gas output and record demand, with dry gas production projected around ~107 bcfd, a level that makes “oversupply anxiety” the default whenever weather is not extreme and storage refills look manageable. In plain terms: when production is that high, rallies need a second engine.

In Q4, the chart shows that second engine switching on hard: the surge (+96.18% into early December) aligns with the LNG channel becoming decisive. Reuters documented record-high U.S. LNG exports in November and linked them to strong output and conditions that improved liquefaction performance, this is not “sentiment,” it’s molecules leaving the domestic system. (U.S. Energy Information Administration) it also has an important context point from Reuters earlier in the year: U.S. LNG exports were already running near records as new plants started and volumes grew, so the market entered 2025 with an export ramp as a structural feature, not a side note.

Finally, the late-year pullback (-27.91% over ~26 days) is consistent with the market’s habit of mean-reverting once the marginal winter premium softens and traders refocus on the same anchor as mid-year: production is high, storage can rebuild, and the curve stops rewarding panic.

Bottom line for gas 2025:
The market spent mid-year trading oversupply, then ended the year trading export-driven scarcity risk.

3) What commodity indices are really showing: “energy beta” plus macro shock windows

S&P GSCI, an energy-heavy, production-weighted index

The S&P GSCI (S&P Goldman Sachs Commodity Index) is designed to reflect the global commodity production footprint, not diversification. Its defining characteristics are:

• Production-weighted methodology
  Each commodity’s weight is proportional to its share of global production value. Because energy dominates global commodity production, energy typically accounts for 50–65% of the index.
• Crude oil is the core driver
  Brent and WTI alone can represent 40%+ of total index weight. This makes the GSCI highly sensitive to:
  • OPEC+ policy decisions
  • Geopolitical supply risks
  • Global demand expectations
  • Inventory and curve structure (backwardation vs contango)
• What it really measures
  The S&P GSCI is best understood as a proxy for global energy inflation and supply risk, not “commodities in general.”

Implication for 2025:

When oil sold off for much of the year due to accelerating supply returns and demand uncertainty, the GSCI naturally underperformed, even though some non-energy commodities were resilient. The sharp June spike in the index maps directly to the geopolitical oil premium, not a broad commodity boom.

In short: if oil sneezes, the GSCI catches pneumonia.

The S&P GSCI chart behaves similarly but with a more pronounced energy imprint (structurally, GSCI tends to be more energy-heavy than many “balanced” baskets). The visible mid-year decline (-8.34% over ~60 days) and later rebound (+6.42% over ~134 days) fit a market oscillating between geopolitical risk bursts and the gravitational pull of oil’s surplus-clearing framework. In 2025, owning GSCI was close to owning “energy beta,” so it tracked the same spring weakness, June spike, and H2 fade logic as Brent.

TR/CRB, a broader, more diversified commodity basket

The TR/CRB Index (Thomson Reuters/CoreCommodity CRB Index) is constructed with a very different philosophy:

• Balanced weighting approach
  No single commodity dominates the index. Energy is important, but far less concentrated than in the GSCI.
• Broader sector representation
  The CRB includes:
  • Energy (oil, gas)
  • Industrial metals
  • Precious metals
  • Agriculture and soft commodities
  Each sector contributes meaningfully to returns.
• What it really measures
  The CRB functions as a general commodity cycle indicator, capturing:
  • Global growth momentum
  • Inflation breadth (not just energy-driven)
  • Cross-sector demand dynamics

In practice, the CRB answers a different question: Is the global economy broadly reflating, or fragmenting by sector?

The TR/CRB chart prints three clean macro windows: -11.64% into April 8, +12.37% into June 18, and -7.24% across a long late-year stretch. That sequencing is coherent when we treat CRB as a blended signal of (a) energy, (b) growth-sensitive commodities, and (c) policy risk.

Implication for 2025:

April’s downdraft is the “macro shock” period in the broader dataset (we saw it across copper, AUD/NZD, and risk assets). It’s the moment where trade uncertainty and global growth repricing tend to hit broad baskets, especially when oil is already vulnerable to surplus narratives. June’s rebound is energy-led: the same Middle East risk premium that lifted Brent also lifts any diversified commodity index with meaningful energy exposure. And the late-year softness reflects what oil was doing: the persistent belief that supply growth (and policy-driven output normalization) would cap sustained upside.

While energy weakness weighed on the CRB at times, strength in metals and agricultural components softened drawdowns. This is why the CRB chart shows mean-reverting, choppier behavior, rather than the deep, oil-driven swings seen in the GSCI.

What 2025 Proved About Energy Markets

1. Geopolitics moves prices fast, but not far, without supply loss.
2. OPEC+ policy decisions now outweigh almost all macro narratives.
3. Natural gas has become structurally global through LNG, even while priced domestically.
4. Energy indices amplify oil’s cycle rather than diversify it.

4) The 2026 cycle setup: base case, upside case, downside case

Oil 2026: three drivers that decide the regime

For oil, 2026 starts with a classic question: Will the market clear via price (lower to stimulate demand and discourage supply) or via policy (OPEC+ restraint)? If OPEC+ continues to prioritize volume restoration or if compliance weakens, the market will keep pricing a surplus bias, meaning rallies will remain headline-sensitive and fade-prone unless inventories draw meaningfully. If, however, OPEC+ pivots back toward defending price and the physical market tightens (lower stocks, stronger refining margins, steadier demand), the curve can re-steepen into backwardation, and the risk premium will “stick” longer when geopolitics flares.

1. OPEC+ strategy (discipline vs market share)
   If OPEC+ maintains discipline, the curve can tighten quickly; if it continues to return barrels into a soft-demand world, rallies will remain sellable. The 2025 experience showed how powerful these policy signals were. Wikipedia+1
2. Demand trajectory under trade uncertainty
   Tariffs/trade friction function less as “one-day headlines” and more as a slow bleed into manufacturing confidence and transport demand. That matters most when supply is rising. Reuters+1
3. Geopolitics as volatility, not trend (unless disruptions persist)
   Geopolitical events can still generate June-style squeezes; but for a durable bull cycle, the market must believe in sustained disruption or a structurally tighter balance.

Natural Gas 2026: the LNG Supercycle meets production reality

For U.S. natural gas, 2026 is primarily an LNG capacity + weather + production discipline story. The important difference versus older cycles is that LNG demand has become an export “sink” large enough to matter almost every month, not just at extremes. So, the 2026 question is: does export growth outpace production growth? If LNG utilization stays high and winter/shoulder seasons deliver tighter storage trajectories, gas can sustain higher average prices with episodic spikes. If production growth reasserts dominance and winter is mild, the market can slide back into the oversupply basin quickly, because the U.S. supply response is still fast.

1. LNG pull is now structural
   The record-export episode in late 2025 is the clearest clue: LNG has become the marginal demand lever that can turn a “comfortable” U.S. balance into a tight one quickly. Reuters
2. Production and storage remain the anchor
   If production remains high and storage stays near normal, rallies need either (a) sustained LNG growth or (b) weather stress. EIA’s framing of normalization reducing volatility is the baseline; 2026 upside requires deviation from that baseline. U.S. Energy Information Administration
3. Weather is the accelerator
   Cold spells don’t create the regime; they exploit the regime. If LNG keeps the balance tight, weather converts tightness into price spikes.

Commodity Indices

For the indices (CRB, GSCI), 2026 will likely be decided by whether the world trades a late-cycle slowdown (pressuring energy and growth commodities) or a policy-supported re-acceleration (helping broad commodities), with energy’s weight making “oil’s balance” disproportionately important to index direction.

• Use GSCI as a proxy for “energy beta.”
• Use CRB as a proxy for “broad commodity reflation vs slowdown.”
  When GSCI underperforms CRB, energy is the drag; when it outperforms, energy is leading the macro tape.

Looking Into 2026: The Setup

• Oil: Direction depends on OPEC+ discipline and non-OPEC supply growth. Without restraint, rallies remain sellable.
• Gas: Volatility persists as LNG capacity expands; winters matter more than ever.
• Indices: Directional trends require either supply disruption or synchronized global growth, otherwise, range trading dominates.

Bottom line

The 2025 energy charts are telling a consistent macro story: oil was a surplus/policy market that only temporarily obeyed geopolitics, while U.S. gas was a domestic balance market increasingly dominated by LNG flows, producing sharper convexity around weather and export utilization. The broad commodity indices simply translated those energy realities into basket form: April risk-off, June risk-premium rebound, and a late-year drift shaped by oil’s inability to sustain a tightness narrative.

For 2026, the playbook is simple but not easy: oil is a policy-and-demand balance trade (OPEC+ vs growth), while gas is a U.S. balance trade that increasingly behaves like a global LNG trade. 2025 taught the market which lever dominates in each product. The only real question for 2026 is which lever gets pulled hardest first.

• share