TotalEnergies said this week it would cut its capital spending by $1 billion annually over the next four years. Chevron and ConocoPhillips are cutting jobs—as are many others in the industry. Shale majors are cutting spending, as well. It is not looking good for the oil industry right now—but it won’t last forever.
That the oil industry has become more cautious lately is a fact – challenges from pro-transition energy government policies have been one reason, and the natural price fluctuation has been another. Now, pretty much every forecaster out there is predicting even lower international oil prices for next year.
They are invariably citing an imbalance between supply and demand, with lukewarm demand and excess supply, thanks to OPEC. Yet here is something interesting: talk about oversupply resulting from a drill-at-will behavior from the U.S. shale industry has stopped. Perhaps because shale has “gone from ‘drill, baby, drill' to 'wait, baby wait’,” per one industry executive.
So, drilling in the key non-OPEC oil producer is in fact shrinking, not expanding, and OPEC itself is falling short of its own production boost targets. The OPEC+ members have so far delivered three-quarters of the increases that began in April 2025. The rise could drop to half of the volumes promised later this year, according to traders and analysts, as some members are close to capacity while others are compensating for previous overproduction.
In other words, on the one hand, U.S. shale producers are not drilling, baby, drilling because they don’t like the current price, and on the other, OPEC, which was supposed to be flooding the market with crude, is not flooding it because it can’t. Demand, meanwhile, appears to be quite healthy. Recent evidence came from Bloomberg, which reported that Russian oil flows were at their highest in 16 months during September, despite pressure from the Trump administration on India and China, the country’s largest oil buyers.
If there is such a strong appetite for sanctioned oil—besides the obvious reason of it selling at a discount—then trends in oil demand must be a lot less dramatic than some forecasters have painted them. There are two standard reasons usually given for the weak demand growth expectations: one, EV sales, and two, U.S. tariffs and their impact on economies around the world. For now, it seems tariffs have failed to sap India’s and China’s oil appetite. EVs, in which China is the biggest market, have also not yet reversed demand trends, and growth continues.
It could be this state of affairs in energy fundamentals that made the International Energy Agency focus on oil and gas field depletion in a recent report that essentially confirmed Big Oil’s expectations of a bullish future for their industry. After all, Big Oil is quite aware of field depletion rates. Yet it took the IEA to make the rest of the world aware, too.
Depletion in oil and gas fields is progressing faster than previously believed, the agency said last month, which means that energy companies would need to spend more on exploration just to maintain the current rate of production. The report was a major shift in the agency’s narrative from 2021 that ‘no new investment’ was needed in a net-zero by 2050 scenario. In other words, when the IEA said that the world does not need any new investment in oil and gas—which at the time weighed on oil prices—it was wrong. This, in turn, suggests that all these forecasters predicting Brent at $50 or even lower for 2026 might end up being wrong as well. Oil demand data often surprises.
Yet even if 2026 does see a surplus of crude oil because the world is reeling from Trump’s tariffs, the spending cuts that Big Oil is planning will affect production, even though TotalEnergies chief executive Patrick Pouyanne framed the strategy as “We can do the same growth with less.”
Some commentators place a major emphasis on share buybacks and how Big Oil is curbing these because oil’s too cheap to afford them at the same scale as, say, three years ago. Investors, apparently, really liked those share buybacks, and they were a big reason why there were any investors left in Big Oil at all, that and dividends. But now that share buybacks had to be curbed, maybe there would be an exodus of investors.
This argument suggests that unless Big Oil offers investors the world and Mars, they would leave for greener pastures in, say, Big Tech. Yet serious investors also follow forecasts and physical world data—and the latter suggests oil and gas have a very bright long-term outlook. Most recently, this was highlighted by BP in its Energy Outlook, where the company pushed back its prediction of peak oil demand to the mid-2030s. OPEC’s long-term bullishness is also worth considering, even accounting for vested interest in such a bullish outlook—Saudi Arabia has been raising its oil prices for Asia, and it would not do that just to convince oil traders that there’s demand. In short, real-world oil fundamentals are once again reasserting themselves, and Big Oil is taking note.
By Irina Slav for Oilprice.com
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