3 Possible Oil Price Scenarios For 2026

The energy sector has been upended by the geopolitical conflict unfolding in the Middle East. News flow from the region is driving dramatic price moves in oil and natural gas. If you are looking at the sector today, you need to consider three possible oil scenarios as 2026 unfolds: prices stay the same, prices rise, or prices start to fall.

Oil prices stay the same

Oil prices are hovering around $100 per barrel, or a little higher. Elevated energy prices will lead to strong financial results for energy producers (upstream companies). The longer oil stays at the current level, the longer producers benefit. The most direct impact will be on pure-play producers like Devon Energy (DVN 0.02%). It further benefits from operating in the United States, far away from the Middle East conflict.

Image source: Getty Images.

However, integrated energy companies like Chevron (CVX +0.14%) will also benefit, but to a lesser degree. Chevron’s midstream (pipeline) and downstream (chemicals and refining) assets, along with its global portfolio, will likely temper the positives of sustained high oil prices.

Oil prices rise further

If the conflict in the Middle East worsens, oil prices are likely to rise further. Prices as high as $200 a barrel have been mentioned. Producers like Devon Energy and Chevron would benefit even more as prices rise. That said, Chevron’s exposure to the downstream, where oil and natural gas are key inputs, would likely be a material limiting factor on the extent to which it benefits. The worst impact from rising prices will likely be felt by pure-play refining businesses, such as Valero (VLO 0.79%), and chemicals companies, such as Dow (DOW 2.24%). That said, cost increases could be offset to some degree by rising prices for the products that downstream businesses produce, which are often commodities themselves.

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NYSE: DVN

Devon Energy

Today’s Change

(-0.02%) $-0.01

Current Price

$48.78

Key Data Points

Market Cap

$30B

Day’s Range

$48.43 - $49.67

52wk Range

$25.89 - $49.83

Volume

805K

Avg Vol

13M

Gross Margin

23.24%

Dividend Yield

1.97%

Oil prices fall

If Middle East tensions de-escalate, oil prices could start to fall. It would likely take some time for the energy market to reset. The biggest beneficiaries of falling prices would be refiners and chemical companies, with Valero and Dow seeing lower input costs. Producers like Devon Energy would be negatively impacted, though it is notable that upstream companies often hedge their energy exposure. That could help to delay the earnings impact to some degree. Chevron’s diversification across the energy value chain would be a net benefit, as its downstream businesses would see lower costs. That could cushion the blow to the upstream business, though it wouldn’t likely be enough to offset the full impact of falling oil prices.

Sidestepping commodity risk

Midstream businesses such as Enterprise Products Partners (EPD +0.29%) will avoid much of the impact from the oil price volatility. Pipeline operators charge fees for moving oil through their energy infrastructure assets, so demand for energy is more important than the price of the commodities moving through their systems.

If you are worried about where oil will go next, a midstream stock could be your best bet. That said, Enterprise’s lofty 5.8% distribution yield will likely make up the lion’s share of your return over time as its toll-taker business tends to grow very slowly.