The global upstream oil and gas sector enters 2026 in a markedly different environment than the previous few years. Supply growth is set to outpace demand, capital discipline is reshaping portfolios, and regional divergence is more pronounced than at any point in the last decade.
1. Global oil supply outpaces demand in 2026.
With a surplus of 2.0 to 4.5 MMbpd. This will drive inventory builds and keep Brent at $55–$60/bbl and WTI in the low-to-mid $50s. The oversupply is driven by non-OPEC+ growth, especially from deepwater.
2. Global oil demand growth will slow to 1.2 MMbpd.
Asia (ex. China) will account for about half of global growth, while developed economies stagnate. Petchem feedstock recovery and resilient LPG/ethane demand will support demand offset by EV growth and efficiency gains.
Exhibit 1. Regional summary of upstream oil & gas markets and trends in 2026.
3. Deepwater and LNG dominate a wave of new project startups in 2026.
Including Guyana’s Uaru, Brazil’s pre-salt FPSOs, Angola’s Agogo Phase 3, Uganda’s Tilenga, and Qatar’s North Field East LNG. Offshore FIDs surge to $164 billion, the highest in over a decade due to larger, lower-cost basins.
4. Breakeven costs diverge sharply.
Deepwater projects need ~$40/bbl, while new U.S. shale wells require $65/bbl and Canadian oil sands exceed $60/bbl. Marginal shale breakevens could rise to $95/bbl by 2035 as core inventory depletes.
5. Offshore and international capex will rise sharply led by Latin America, Africa, and MENA.
North American onshore operators are cutting or freezing budgets, focusing on maintenance and efficiency. U.S. shale growth moderates to 1–2%, with flat-to-modest Permian gains and other plays declining.
6. Europe doubles down on methane regulation and Carbon Border Adjustment Mechanism (CBAM) taking effect in 2026 impacting exporters.
The U.S. shifts to deregulation, postponing methane charges to 2034, while Canada implements strict emissions caps (27% below 2026 levels by 2030). Asia introduces new carbon taxes and market reforms.
7. Geopolitical tensions remain high.
EU sanctions on Russian oil and LNG intensify, Middle East risks persist (Strait of Hormuz, Iran-Israel), and U.S.-Venezuela relations are unstable, elections in Brazil and Colombia, and USMCA review add uncertainty risking supply chains and trade flows.
8. M&A activity pivots from mega-consolidation to strategic optimization.
Africa sees a wave of asset transfers from majors to indigenous operators, while U.S. deal flow accelerates around natural gas assets for LNG and data center power. Canada consolidates in the Montney and Clearwater plays.
9. Companies retreat from broad decarbonization, focusing on methane abatement.
Investments shift toward low-cost emission reduction (vapor recovery, zero-bleed pneumatics). Digital and AI will find new focus as OFSE majors such as SLB are reporting 35% margins in digital divisions.
10. International and offshore markets lead oilfield services recovery, with high demand for deepwater rigs, subsea contractors, and digital solutions.
Vessel utilization is near record levels in Brazil, Guyana, and West Africa. North American activity is subdued, but natural gas demand for LNG and data centers creates upside for drilling and completions in gas plays.
2026 is a year of normalization, not expansion. The winners will be those who adapt to lower prices, high-grade portfolios, and invest in operational efficiency and emissions management. Offshore and LNG are the clear bright spots, while North American shale and oil sands face headwinds. Regulatory divergence and geopolitical risk require scenario planning and flexibility. For operators, suppliers, and investors, the message is clear: focus on resilience, efficiency, and compliance to navigate the new upstream landscape.
We invite you to join us at the ADI Forum on January 28 in Houston, where we will discuss these findings in greater depth with a panel of executive perspectives. It is a premier opportunity to engage with industry leaders on the strategic implications of these shifts.
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