Energy cushion fading
Market analysts say the cheap‑energy tailwind that had been cushioning stocks is weakening even after record U.S. crude production of 13.6 million barrels per day in 2025. (247wallst.com) With that buffer reduced, commentators warn equities are more exposed to political and policy shocks. (247wallst.com)
Cheap oil is no longer doing as much work for Wall Street as it did in 2025, even with U.S. crude output still near a record. (eia.gov, eia.gov) The U.S. Energy Information Administration said U.S. crude production averaged a record 13.6 million barrels a day in 2025 and is forecast at 13.5 million in 2026. In the same April 2026 outlook, it raised its 2026 Brent crude forecast to $96 a barrel from $69 in 2025 and its U.S. gasoline forecast to $3.70 a gallon from $3.10. (eia.gov, eia.gov) That change followed a first quarter in which Brent crude started near $61 a barrel and finished the quarter at $118 after military action in the Middle East on February 28 and a de facto closure of the Strait of Hormuz, according to the Energy Information Administration. The agency said the Brent-West Texas Intermediate spread peaked at $25 a barrel on March 31, the widest in more than five years. (eia.gov) Energy had been helping in two ways: lower fuel costs supported household spending, and higher domestic output kept U.S. benchmark crude from rising as fast as seaborne Brent. The Energy Information Administration said strong U.S. inventories and plans to release crude from the Strategic Petroleum Reserve helped limit West Texas Intermediate price increases in March. (eia.gov) That buffer weakened in March when higher fuel prices pushed inflation back up. The Bureau of Labor Statistics said consumer prices rose 0.9 percent in March from February, while the energy index jumped 10.9 percent and gasoline rose 21.2 percent, accounting for nearly three quarters of the monthly increase. (bls.gov) Stocks still have some direct exposure to rising oil through energy shares, but that slice is limited. S&P Dow Jones Indices said the S&P 500 energy sector gained 37.87 percent in the first quarter, while the S&P 500 excluding energy fell 5.56 percent over the same period. (spglobal.com) The sector’s rally does not offset the broader hit from pricier fuel because energy is only one of 11 sectors in the index and most companies buy energy rather than sell it. S&P Dow Jones Indices’ March 31 dashboard showed energy up 10.28 percent for the month, while technology fell 4.07 percent and financials fell 3.53 percent. (spglobal.com) The Energy Information Administration now expects U.S. retail gasoline prices to peak near $4.30 a gallon in April before easing later in 2026 if disruptions fade. Its forecast assumes Middle East supply losses begin to reverse after April and Brent falls below $90 a barrel in the fourth quarter. (eia.gov) If that easing does not happen, the market loses one of the clearest cushions it had last year: abundant U.S. supply translating into relatively cheap fuel. In April 2026, the government’s own forecast still shows near-record U.S. production, but it no longer shows cheap energy. (eia.gov)
