Josef Schachter: Oil Prices to Hit US$80+ in 2026, When to Buy Stocks

Key Concepts

• WTI (West Texas Intermediate): A benchmark crude oil price.
• S&P TSX Energy Index: A stock market index tracking the performance of Canadian energy companies.
• S&P Energy Bullish Percentage Index: Measures investor sentiment towards the energy sector.
• PDP (Proved Developed Producing): Oil and gas reserves that are proven, developed, and currently producing.
• 1P & 2P: Categories of oil and gas reserves, with 2P (Proven + Probable) representing a higher level of certainty and typically commanding higher valuations.
• LNG (Liquefied Natural Gas): Natural gas cooled to a liquid state for easier transportation.
• NAX & ECO: Natural gas price benchmarks (NAX for Alberta, ECO for Eastern Canada).
• TMX (Trans Mountain Expansion): A pipeline expansion project in Canada designed to increase oil export capacity.
• FID (Final Investment Decision): The point at which a company commits capital to a project.
• Montney & Duvernay: Major shale gas and oil formations in Western Canada.

Oil & Natural Gas Outlook: 2026 – A Review of 2025 & Future Projections

Introduction

This discussion with Joseph Shakar, President of the Shaker Energy Report and a 40-year industry veteran, analyzes the performance of the oil and natural gas markets in 2025 and provides a forward-looking outlook for 2026. The conversation centers on price drivers, investment opportunities, and potential market shifts.

I. 2025 Oil Market Performance & Buy Signals

Despite initial forecasts of $80/barrel WTI, oil prices in 2025 remained lower due to weakening US consumer demand and the imposition of tariffs disrupting global trade. Prices fell to $54-$56/barrel in April, triggering a “buy signal” based on three key indicators:

1. Price Below Economic Threshold: The average breakeven price for Texas oil basins, as determined by the Federal Reserve of Dallas, is approximately $65/barrel. The April dip below this level signaled a potential buying opportunity.
2. S&P TSX Energy Index Decline: The index fell below 240 (from a starting point in the 290s), reaching a low of 214, indicating undervaluation in the Canadian energy sector.
3. Extreme Pessimism (Bullish Percentage Index): The S&P Energy Bullish Percentage Index reached an unprecedented low of 0% in April, signifying maximum bearish sentiment and a contrarian buy signal. Historically, this index has bottomed out at 3-4% during crises like 2008 and 2020.

II. Successful Investment Strategies in 2025

Following the buy signals, Shakar’s firm issued recommendations resulting in significant returns for investors. Examples include:

• Birch Cliff: Increased from $4.71 to $7.56.
• InPlay Oil: Increased from $0.654 to $12.27.
• Strathcona: Increased from $2.275 to $4.50.
• New Vista: Acquired by Ointive, with initial investment at $11 and acquisition at $18.

These gains were achieved even during a period of overall lackluster oil prices, demonstrating the potential for selective investment in undervalued companies. Dividend-yielding stocks also performed well, offering both income and capital appreciation. Natural gas stocks, driven by LNG Canada and increasing data center demand, also saw substantial gains.

III. Current Market Conditions & Q1 2026 Correction Anticipation

As of the conversation date, WTI oil is trading just under $58/barrel, the S&P TSX Energy Index is around 298, and the Bullish Percentage Index is at 49%. Shakar anticipates a correction in Q1 2026 before a more substantial rally. He recommends investors adjust their portfolio weighting to 80% of their target allocation during this correction, increasing to 100% upon the next buy signal. Portfolio allocation should be tailored to regional preferences (e.g., higher energy weighting for Western Canada).

IV. 2026 Oil Price Forecast

Shakar projects the following oil price ranges for 2026:

• Q1: $52 - $66/barrel (low in January/February)
• Q2: $62 - $72/barrel
• Q3: $68 - $78/barrel
• Q4: $74 - $84/barrel

He believes that exceeding $80/barrel will trigger multiple expansion and renewed investor interest. Long-term, he anticipates oil prices surpassing the 2008 high of $147/barrel, citing limited industry capacity to respond to increasing demand. Warren Buffett’s prediction of $200/barrel oil is also noted.

V. Natural Gas Outlook & Key Drivers

Natural gas prices are currently at $3.15/Eco and $4.60/NAX. Shakar expects continued growth driven by:

• LNG Canada: The ongoing development of LNG export facilities.
• Data Center Demand: Increasing energy requirements for data centers.
• Infrastructure Development: The need for grid improvements.

He forecasts potential for $5-$6/NAX and anticipates significant demand growth in Western Canada with the expansion of LNG export capacity.

VI. M&A Activity & Consolidation Trends

Shakar predicts continued mergers and acquisitions (M&A) activity in the oil and gas sector, driven by the principle that it is cheaper to acquire existing production than to develop new resources. Consolidation is expected to be particularly prominent in the Montney and Duvernay shale formations. Recent deals, such as MEAG’s acquisition by Senovas and New Vista’s acquisition by Ointive, exemplify this trend.

VII. Investment Considerations & Key Takeaways

• Undervaluation: The energy sector remains undervalued compared to other asset classes.
• Dividend Income: Many energy companies offer attractive dividend yields.
• Multiple Expansion: Rising commodity prices are expected to drive multiple expansion.
• Geopolitical Factors: Geopolitical events (e.g., Venezuela situation, Russia-Ukraine war) can significantly impact oil prices.
• Infrastructure Constraints: Limited infrastructure capacity will constrain supply and support higher prices.
• Demand Growth: Increasing energy demand from developing countries and emerging technologies (e.g., data centers) will drive long-term growth.
• Canadian Opportunity: Canadian energy companies offer attractive investment opportunities, particularly in natural gas.

Conclusion

Shakar’s analysis paints a bullish picture for the oil and natural gas sector in 2026 and beyond. He emphasizes the importance of identifying undervalued companies, capitalizing on market corrections, and understanding the key drivers of supply and demand. He advocates for a diversified portfolio approach, considering both growth-oriented and income-generating energy investments. The combination of constrained supply, growing demand, and geopolitical factors suggests a favorable environment for energy investors in the coming years.