(Oil Price) – Wood Mackenzie now estimates that the global upstream oil and gas sector could generate $495 billion in free cash flow in 2026 if crude averages $90 per barrel, more than doubling its previous forecast based on a $60 oil price assumption. The revision follows the sharp jump in crude prices triggered by the Middle East conflict, turning what had been expected to be another year of disciplined cash generation into one of the industry’s most lucrative windfalls in recent years. Yet the gains will be concentrated among the world’s largest producers, with the 49 national and international oil companies covered by Wood Mackenzie expected to capture $272 billion of the total. Wood Mackenzie expects the conflict to reduce global oil production by at least 3%, with Iraq accounting for roughly 3 million barrels per day of lost output, while damage to infrastructure in Qatar is projected to cut global LNG supply by 2%. The stronger cash flow outlook does not alter the industry’s longer-term production trajectory. Wood Mackenzie projects average production across the 155 upstream companies it tracks will fall 30% between 2030 and 2040, with more than 70 producers facing declines of more than 50% unless they make significant new investments.
However, WoodMac says energy companies are likely to maintain capital discipline despite the unexpected influx of cash, with capex budgets expected to largely remain flat while share buybacks are projected to decrease by 5% as boards prioritize balance sheet strength and deleveraging.
