- Wood Mackenzie says the global upstream sector could generate a US$495 billion cash windfall in 2026 as Brent crude averages about US$90 per barrel.
- Investment budgets have remained largely unchanged despite stronger cash flows, with companies choosing to strengthen balance sheets instead of increasing spending.
- Long term production declines and geopolitical uncertainty continue to shape investment decisions across the industry.
The global oil and gas industry is on course to generate a US$495 billion cash windfall in 2026, but leading producers are continuing to exercise capital discipline rather than significantly increasing investment or shareholder returns, according to Wood Mackenzie‘s Mid-Year Upstream and Corporate Outlook.
The report estimates that the 49 largest international and national oil companies covered by Wood Mackenzie will capture US$272 billion of the additional cash flow, equivalent to around 70% of their combined capital investment for the year.
The stronger financial position follows a sharp rise in oil prices. Companies entered 2026 expecting Brent crude to average about US$60 per barrel, but prices averaged US$91 per barrel during the first half of the year. Despite the higher revenues, capital expenditure budgets have remained largely unchanged, while share buyback programmes are expected to decline by about 5% compared with 2025.
Tom Ellacott, Senior Vice President of Corporate Research at Wood Mackenzie, said the industry’s response to market volatility has been notable for its restraint.
“Most companies have adopted a wait and see approach, preferring to build cash reserves rather than increase shareholder distributions or investment. Capital discipline has proved more resilient than many expected.”
Wood Mackenzie said the sector continues to face significant long term production challenges. Analysis of 155 upstream companies indicates average production could decline by 30% between 2030 and 2040, representing a reduction of 32 million barrels of oil equivalent per day, excluding Middle Eastern national oil companies. More than 70 companies are expected to see production fall by 50% or more over the same period.
The report also found that global upstream development spending is on track to decline for a second consecutive year as operators continue to prioritise maintenance deferrals, operational optimisation and lower capital projects over major new developments.
Despite ongoing market volatility, merger and acquisition activity has remained strong during the first half of 2026. Major transactions included Shell’s US$16 billion acquisition of ARC, Devon’s US$25 billion merger with Coterra and Mitsubishi’s US$7.5 billion acquisition of Aethon.
Wood Mackenzie also revised its global supply outlook, forecasting oil production will decline by at least 3% in 2026, compared with earlier expectations of similar growth. Global LNG supply is now expected to contract by at least 2%, reversing a previous forecast for 8% growth, with disruptions in the Middle East, particularly in Iraq and Qatar, contributing to the weaker outlook.
Fraser McKay, Head of Upstream Analysis at Wood Mackenzie, said the current oil price environment is being driven by geopolitical instability rather than underlying market fundamentals.
He said stronger balance sheets have improved the financial position of producers, but companies remain focused on preserving resilience and preparing for future production challenges. If elevated prices continue through the second half of the year, pressure is expected to increase on company boards to deploy capital through acquisitions, shareholder returns or new investment decisions.
Author: Bryan Groenendaal