Oil Executives Brace For Another Tough Year Ahead
The oil markets are looking to finish the year on the back foot, with oil prices falling again amid expectations of a supply glut and Russia-Ukraine peace talks reviving. Nearly half of oil executives in the Dallas Fed’s latest survey have reported that their companies’ outlooks have worsened in the current year compared with last year as low oil prices take a toll.
“Decreasing oil prices are making many of our firm's wells noneconomic,” one executive said in the new survey.
“Natural gas is becoming an expense to operators. Last month, we paid our gas purchaser to take our gas because prices fell below contract price, and we paid the difference to the purchaser. Never in my 50 years in the oilfield has this ever happened. The result is, natural gas can be an expense to the production process with huge downsides to our predicted economics for profits on oil and gas developments,’’ lamented another executive.
Oil executives expect oil markets to remain depressed, with respondents projecting West Texas Intermediate (WTI) oil prices to finish 2026 at $62 per barrel, lower than the average of $65.32 per barrel that the EIA has projected for 2025. For some context, the EIA projects Brent crude to average $55.08 per barrel in 2026 while WTI is expected to average $51.42 per barrel. Oil executives expect oil markets to be oversupplied in 2026 if the Trump administration succeeds in ending the Ukraine conflict and Russian sanctions are lifted; however, if Russian sanctions continue, along with reduced oil volumes from Iran and Venezuela, markets may approach a balanced position. The energy leaders are more bullish about longer-term expectations, predicting WTI prices to average $69 per barrel in 2027 and $75 per barrel by 2029/2030.
Related: EIA: Brazil, Guyana, Argentina Driving 2026 Oil Output Growth
On a brighter note, most executives at large E&P companies are optimistic that AI will help lower their break-even prices for new wells over the coming years, albeit cost savings are expected to be modest. The majority of oil & gas support services firms (nearly 60% combined) expect AI to slightly or meaningfully increase equipment lifespan, while 39% don't foresee any impact. Meanwhile, nearly 80% do not expect AI to replace personnel in their firms over the next five years, with similar sentiments across small E&P, large E&P, and support services firms.
Interestingly, Big Oil companies have been faring better-than-expected in this environment, with many reporting lower but still robust profits in the current year. Further, these companies have been defying expectations to cut production amid lower oil prices, and have continued ramping up oil output, helping offset some of the decline in oil prices. Exxon Mobil (NYSE:XOM) reported Q3 earnings of $7.54 billion, 12.4% lower from a year ago while revenue of $85.3 billion represented a 5.3% Y/Y decline. Exxon’s earnings in the first nine months clocked in at $22.3 billion, representing a 14.3% decline from the previous year’s corresponding period. The four Big Oil companies, namely Exxon, Chevron (NYSE:CVX), Shell (NYSE:SHEL) and TotalEnergies (NYSE:TTE), realized more than $21 billion in combined net income in the third quarter, a remarkable haul after oil prices declined more than 20% from the previous year.
Content Original Link:
" target="_blank">
