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.
There’s a method to the madness, though. Exxon reported an additional $2.2 billion in structural cost savings in the third quarter and has now surpassed $14 billion in cumulative cost savings since 2019. The company is targeting more than $18 billion in cumulative cost savings by the end of 2030. The company is able to achieve these kinds of savings through automation, supply chain optimization, and improvements in operational technology. Exxon’s earnings breakeven point is now $10-15 per barrel lower compared to the situation five years ago, making the company much more resilient to falling oil prices. Exxon estimates that its portfolio-weighted breakeven is now $40-42 per barrel, giving the company a healthy margin buffer even at $60 oil.
Further, Exxon remains confident of its ability to generate profits in the current environment, and has increased hydrocarbons production to 4.7 million oil-equivalent barrels per day (boe/d), including nearly 1.7 million boe/d from the Permian and more than 700,000 boe/d from Guyana. Meanwhile, Exxon brought the Yellowtail project online in the third quarter, four months ahead of schedule. Yellowtail production is expected to clock in at 250,000 boe/d, increasing total Guyana output to over 900,000 boe/d.
The story is pretty much the same at Chevron.
The United States’ second-largest oil company posted record global production of 4.09 million boe/d, up 21%Y/Y, including a 27% Y/Y increase in U.S. production to a record 2.04 million boe/d. Chevron was able to achieve this despite deploying fewer drilling rigs as well as fewer completion spreads, demonstrating strong operating leverage. Chevron saw Q3 2025 net profit fall to $3.54 billion, from $4.49 billion in Q3 2024, while earnings fell to or $1.82/share from $2.48/share in the year-earlier quarter. However, revenues were only marginally lower at $48.17 billion from $48.93 billion a year ago, with increased production helping offset lower crude prices.
By Alex Kimani for Oilprice.com
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