Global upstream capital expenditures are projected to decline once more in 2026 due to persistently low oil prices

Global Upstream Oil Investment Trends

In the previous year, investments in upstream oil were anticipated to decrease by 2.5% year-over-year, reaching $420 billion. This reduction was largely attributed to suppressed oil prices, which compelled producers to scale back expansion efforts and focus on financial stability. Across the sector, companies emphasized maximizing profits, generating free cash flow, and reducing debt, rather than pursuing aggressive output increases—a strategy reinforced by ongoing economic uncertainty. The overall decline was also influenced by lower spending from independent U.S. shale and light tight oil producers, even as Middle Eastern national oil companies ramped up their investments and conventional projects demonstrated greater resilience.

Outlook for 2026: Continued Investment Cuts

Industry analysts at Wood Mackenzie expect these patterns to persist into the current year. Their projections indicate that global upstream operators will reduce capital expenditures for a second straight year in 2026, with spending forecasted to drop by at least 2-3% compared to the previous year, and over 5% below 2024 levels. This comes as the industry contends with oil prices below $60 per barrel and maintains a focus on long-term stability. While investment is set to decline in North America and Europe, increases are anticipated in Africa, Latin America, and the Middle East, balancing the global picture.

Non-OPEC Supply Growth and Regional Highlights

Despite these financial constraints, worldwide supplies of non-OPEC liquids and natural gas are expected to expand by approximately 1.5% each. Brazil, Guyana, and Argentina are poised to be the primary contributors to non-OPEC oil supply growth in 2026, together accounting for half of the projected 0.8 million barrels per day (b/d) increase, according to the U.S. Energy Information Administration (EIA). Brazil’s output boost will be driven by new offshore pre-salt developments, including Equinor’s Bacalhau field, which is scheduled to begin operations in October, and two additional FPSOs from Petrobras launching in December. The EIA forecasts Brazil’s production to rise by 0.2 million b/d in 2026, reaching 4.0 million b/d.

Guyana is experiencing rapid output growth due to Exxon Mobil and its partners’ accelerated development of the Stabroek Block. With new FPSOs such as Yellowtail, Uaru, and Whiptail coming online, production could surpass 1 million b/d. The Yellowtail project has already reached full capacity, pushing Guyana’s output above 900,000 b/d, with increasing crude exports to Asia.

The Uaru project, expected to start in 2026, will add another 250,000 b/d, potentially raising Guyana’s crude production above 1 million b/d by 2027.

Argentina is also set for significant growth, primarily due to its vast Vaca Muerta shale reserves. The EIA projects Argentina’s oil production to average 810,000 b/d in 2026, up from 740,000 b/d in 2025 and 670,000 b/d in 2024.

Long-Term Supply and Demand Projections

Earlier forecasts from Rystad Energy highlighted that offshore oil from Brazil, Guyana, Suriname, and Argentina’s Vaca Muerta shale will remain crucial sources of competitively priced non-OPEC supply through 2030. Rystad anticipates global liquids demand to peak in the 2030s at around 107 million b/d, maintaining levels above 100 million b/d through the 2040s before declining to roughly 75 million b/d by 2050. The consultancy emphasizes the importance of non-OPEC+ supply in balancing the global market, with affordable South American oil offsetting slower U.S. shale growth. Non-OPEC+ producers are expected to contribute about 5.9 million b/d, or nearly 60% of new conventional oil capacity under development by 2030. South America is projected to provide 560,000 b/d of this growth, with North America adding approximately 480,000 b/d.

U.S. Oil Production and Global Gas Investment

The EIA predicts that U.S. oil production will experience a slight decrease in 2026 after years of expansion, averaging around 13.5 million b/d—a drop of about 100,000 b/d from 2025. While output in the Permian Basin, Alaska, and the Gulf of Mexico may rise, declines in other regions are expected to offset these gains. This marks a potential plateau in U.S. production, influenced by lower oil prices and a global supply surplus.

In contrast, Wood Mackenzie forecasts a 7% increase in global gas investment for 2026, even as oil spending contracts. This uptick is linked to the launch of new LNG projects, particularly in the United States, Canada, and Qatar, which are set to boost both supply and demand. Overall, analysts from Wood Mackenzie and Fitch Ratings agree that oil and gas companies will likely maintain strict capital discipline and may further reduce spending in 2026 due to price volatility and oversupply. Upstream investment by the seven largest oil companies is expected to remain relatively steady compared to previous years.

By Alex Kimani for Oilprice.com

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