Supermajors Bet Big on Long-Term Oil Demand
- Major international oil firms are increasing production despite weakening crude prices and a global supply surplus, anticipating sustained demand until at least the mid-2030s.
- European and U.S. supermajors are investing in new oil and gas field developments and exploration, with companies like ExxonMobil and Chevron achieving record production volumes.
- Oil companies are confident in their long-term strategy, even as they slash costs and workforce numbers to protect shareholder payouts amidst the current market conditions.
The world’s largest international oil firms are ramping up production even as crude prices have weakened this year and global supply growth continues to outpace the demand increase, setting the stage for a glut in the coming months.
The European majors are back to investing in exploration and new oil and gas field developments after years of trying – and mostly failing – to generate profits and good returns from low-carbon energy projects, including renewable electricity, green hydrogen, and biofuels.
Big Oil Output Hits Record Highs
The U.S. supermajors, ExxonMobil and Chevron, are pumping record oil volumes in the top shale region, the Permian, while betting on international project expansions in Guyana and Kazakhstan, for example. The U.S. giants both reported in the second quarter record-high production in the Permian and worldwide, following Exxon’s acquisition of Pioneer Natural Resources and Chevron’s buying of Hess.
France’s TotalEnergies expects higher oil and gas production to have boosted earnings for the third quarter, despite a $10 per barrel decline in oil prices since last year.
Production at the other European supermajors, Shell and BP, is also rising as the European giants shifted focus back to their core oil and gas business. The pivot took place after the energy crisis made energy security and affordability more important than sustainability, while high interest rates and supply chain issues further reduced already meager returns from clean energy projects and made many new energy ventures uncompetitive.
Big Oil Bets on Solid Demand
The supermajors are confident they can withstand the current weaker prices and the surplus on the market, to which they have contributed, alongside the national oil companies of the OPEC+ producers, which have been reversing the production cuts this year.
Big Oil is looking beyond the short-term fundamentals and glut noise, having decided to invest more in oil and gas to meet solid demand until at least the mid-2030s.
Unlike the International Energy Agency (IEA), which earlier this year doubled down on its forecast of peak oil demand by the end of this decade, Big Oil companies don’t see any peak by 2030.
BP, which said last year that global oil demand would peak as early as this year, ditched this view in its new annual Energy Outlook last month, in which it now expects oil demand to rise through 2030 amid weaker-than-expected efficiency gains.
Most majors have put the peak at some point in the 2030s, but none expect a rapid decline afterwards, and all say that oil and gas will remain essential for global economic growth and development in 2050.
“Oil and natural gas are essential. There’s no other viable way to meet the world’s energy needs,” ExxonMobil said in its 2025 Global Outlook.
“Our Global Outlook projects that oil and natural gas will make up more than half of the world’s energy supply in 2050. We project that oil demand will stabilize after 2030, remaining above 100 million barrels per day through 2050,” the U.S. supermajor reckons.
“All major credible scenarios include oil and natural gas as a dominant energy source in 2050.”
All three scenarios analyzed in Shell’s 2025 Energy Security Scenarios found that upstream investment of around $600 billion a year “will be required for decades to come as the rate of depletion of oil and gas fields is two to three times the potential future annual declines in demand.”
Exxon and now the European majors are playing the long game—invest in new oil and gas supply, at the expense of renewables, to offset with new production the accelerating natural decline of producing oil and gas fields.
Even the IEA admitted last month that the world needs to develop new oil and gas resources just to keep output flat amid faster declining rates at existing fields, in a major shift in its narrative from 2021 that ‘no new investment’ is needed in a net-zero by 2050 scenario.
Exploration is also back at the top of the agenda for Big Oil, as the companies appear confident their product will be in demand for decades to come.
The expected massive overhang later this year and early next year is not putting off the supermajors’ plans to increase production. They are slashing costs via cutting thousands of workforce numbers to protect shareholder payouts at $60 per barrel oil. Companies have pledged billions of U.S. dollars in cost savings and slimmer corporate structures. That’s to eliminate inefficiencies and excessive costs while keeping payouts to shareholders at much lower prices compared to the 2022 highs.
This year, higher oil and gas production is partly offsetting the weaker prices.
Increased output also positions the world’s biggest companies for rising profits when the glut clears within a year or so, analysts say.
“All the supply coming to the market is shrinking OPEC’s spare capacity — so there’s a light at end of the tunnel,” Barclays analyst Betty Jiang told Bloomberg this week.
“Whether that’s second half of 2026 or 2027, the balance is going to tighten. It’s just a matter of when.”
By Tsvetana Paraskova for Oilprice.com
Analysts Eye Big Oil's Spending and Acquisition Plans
- Big Oil's third-quarter earnings are being reported, with analysts primarily interested in the supermajors' strategic plans for 2026, including spending, production, and potential acquisitions.
- Natural gas, particularly LNG, is a major focus for these companies, with Shell, BP, TotalEnergies, Exxon, and Chevron all making significant investments and plans for expansion in response to rising global electricity demand.
- Despite lower international oil prices and predictions of a supply overhang, Big Oil is expected to increase oil and gas output in both the current and coming year, indicating a belief in demand resilience that contrasts with some other forecasts.
Big Oil is reporting third-quarter results this week and next. No surprises are expected—Big Oil has been having an eventful year featuring tariffs, sanctions, and glut predictions—and these events will be reflected in financial reports. Yet analysts are already looking ahead to 2036 and what Big Oil plans to do next.
So far, two big oil companies have reported third-quarter figures: Norway’s Equinor and Italy’s Eni. Both demonstrated the dominant trends in the industry, likely to be seen in the reports of BP, Shell, TotalEnergies, Exxon, and Chevron in the coming days. Equinor missed analyst expectations because of lower prices, despite higher oil and gas production, while Eni enjoyed better revenues and profits thanks to higher oil and gas production, despite lower prices. Shell and TotalEnergies today reported strong performance on higher oil and gas production.
What analysts appear to be interested in, according to a preliminary earnings season overview by Reuters, is what Big Oil plans to do in 2026 in terms of spending, production, and maybe acquisitions. They would want to hear how Chevron’s merger with Hess Corp. is going, what Exxon’s next acquisition target is going to be, and how European Big Oil will handle its share buybacks and dividends in a lower-price environment. Last but by no means least, analysts would want to hear about the supermajors’ natural gas plans.
These plans are certainly in place. With artificial intelligence driving a global surge in demand for electricity, natural gas has returned to the spotlight as the best of both worlds: more reliable than wind and solar, and lower-emission than coal.
Shell, for instance, said in a trading update earlier this month that its natural gas business would boost its overall third-quarter performance. Indeed, it did: for the third quarter, Shell reported a solid increase in its LNG business. The company earlier announced plans to turn its LNG business into a top priority for the next ten years in response to the demand projections.
BP is also prioritizing gas and LNG, recently contracting Baker Hughes for a new LNG plant in Indonesia, and recently winning an arbitration case against Venture Global regarding undelivered LNG cargos. TotalEnergies, for its part, lifted the force majeure on its Mozambique LNG project this week, even as the price tag was revised higher by $4.5 billion. The facility will have a capacity of 43 million tons of liquefied gas once completed.
Exxon, meanwhile, plans to announce the final investment decision on its own LNG project in Mozambique by the end of the first quarter of 2026, even though the company just canceled a public appearance to report on the project’s progress. Another LNG project of the supermajor, Golden Pass, is expected to start operations by the end of this year.
Chevron is focusing on trade. The company just sealed an LNG supply deal with Energy Transfer for the delivery of 1 million tons of LNG from the Lake Charles plant, bringing its total purchase commitments for that plant alone to 3 million tons annually over 20 years. Big Oil is a big fan of LNG. The supermajor is also investing in LNG supply globally, like its peers.
In oil, analysts see the supermajors struggling with the effects of lower international prices. It could be only a perception of a struggle, however, while the companies themselves remain financially disciplined and plan for production boosts—despite the gloomy predictions of a 4-million-barrel-daily supply overhang in 2026 as estimated by the International Energy Agency.
Indeed, Bloomberg this week reported analyst estimates see all the supermajors increase their oil and gas output both this year and next, regardless of prices. This suggests Big Oil does not really agree with the IEA about demand and supply—and that it is betting on demand resilience that the IEA and other transition-leaning forecasters argue does not exist.
By Irina Slav for Oilprice.com
No comments:
Post a Comment