Decarbonisation Technology February 2026 Issue

Energy trilemma: refiners must plan to pivot How refiners can overcome today’s volatility – from geopolitical tensions to shifting trade dynamics – and turn uncertainty into competitive advantage

Alan Gelder Wood Mackenzie

Oil market surplus drives lower prices in 2026 Wood Mackenzie’s oil demand growth projections for 2025 were downgraded after the US administration declared ‘Liberation Day’ last April. The 2025 global Gross Domestic Product (GDP) was better than initially feared, comparable to 2024 levels, as tariff increases were paused and businesses frontloaded trade ahead of the tariff changes. China’s economic stimulus measures and a capital expenditure boom in artificial intelligence (AI) technology all provided support during 2025. However, we forecast growth will slow in 2026 as the impacts of tariffs are felt by US consumers and China faces internal and external headwinds. We believe that the US effective tariff rate has already peaked and will fall through 2026 and 2027 from new

bilateral trade deals with the US and trade flow optimisation. However, these factors are unable to deliver stronger global growth in 2026. The impact of weak global GDP growth is to keep 2026 global oil demand growth below 2025 levels at under 700 kb/d, as shown in Figure 1 . The key growth regions are ‘Other Asia Pacific’ and India, both of which are forecast to grow less than 200 kb/d annually. China’s oil demand growth is forecast to be weak as road transport fuels (gasoline and diesel) continue their decline due to vehicle electrification (as of the end of 2024, EVs represented almost 60% of new vehicle sales for passenger cars, and liquefied natural gas (LNG)/EVs accounted for almost 40% of new commercial vehicle sales), whereas jet fuel and petrochemical feedstocks show continued growth.

Demand growth by market, 2026

Regional non-OPEC growth, million b/b

300

2.5

2.0

200

1.5

1.0

100

0.5

0.0

-0.5

-1.0

2022 2023

2024 2025 2026 2027

-100

North America Asia

Europe

Russia and Caspian

China

India

Other Asia Pacic

Latin America

Africa

Latin America

Middle East

Russia and Caspian

USA

Europe

Middle East

Africa

Figure 1 Global oil demand growth and regional non-OPEC supply growth.

Source: Wood Mackenzie Macro Oils Service