Big Oil Prepares for Leaner Prices and Harder Choices in 2026

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The oil market oversupply is here, evident in the price swings in both directions in recent weeks. Geopolitical developments have moved oil up or down, but the hikes and dips have been short-lived and smaller than they would have been if the market were tight or balanced.

The market is headed to as much as 3.84 million barrels per day (bpd) of supply exceeding demand in 2026, the IEA said in its latest monthly report for December.

The oil glut will be short-lived, many analysts say, and they expect the market to start balancing later in 2026 and into 2027.

Goldman Sachs, for example, said in its Commodities Outlook 2026 that “While 2026 is the last year of the oil supply wave, the LNG supply wave is much longer with a predicted surge in LNG exports of over 50% in 2025-2030.”

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The intelligence firm (Rystad) expects U.S. shale output to prove resilient again, at WTI Crude prices at about $60 per barrel.

Public companies are set to defend maintenance production to avoid an outright decline and could opt for lowering payout ratios, hoping to gain operational and overhead synergies from M&A activity to offset full-cycle costs, according to Rystad’s Matthew Bernstein, Vice President, North America Oil & Gas.

Wood Mackenzie expects Lower 48 oil production to stall in 2026 for the first time since the pandemic. However, the Permian remains the powerhouse of U.S. oil supply.

For the first time ever, combined production from the Delaware Wolfcamp, Bone Spring, Midland Wolfcamp, and Midland Spraberry will account for more than 50% of total onshore U.S. oil output in 2026, per WoodMac’s estimates.

The U.S. mergers market will shift to gas-weighted plays with gas demand soaring due to hikes in LNG exports and demand for power generation amid the AI-led growth in electricity demand.

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In the year ahead, Big Oil, the national oil companies (NOCs), and the U.S. and international independents will face an even tougher strategic balancing act than in 2025, they said.

In light of muted oil prices and oversupply, companies are bracing themselves for lower prices in 2026, but they are more optimistic about their medium and long-term prospects as they shift capital from renewables to upstream oil and gas and are venturing into frontier exploration in the hope of finding the next elephant discovery.

Companies are getting ready to weather the glut in 2026, and buybacks could be trimmed first, WoodMac reckons.

“Lower oil prices will force more structural cost reductions and cuts to buybacks. But the pressure will intensify to lay stronger foundations for next decade,” the analysts noted.

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