While first-quarter financial reports this year indicated that major oil giants remained stable in a $60-per-barrel oil environment, analysts at the Asia Pacific Petroleum Conference predicted that Brent crude could fall below $60 this year and remain there until 2026. Wood Mackenzie further projected that, barring any geopolitical supply disruptions, international oil prices may linger around $50 per barrel for an extended period.
Amid deteriorating demand expectations, clear signals of a shift have emerged in the oil and gas industry. Data from the U.S. Bureau of Labor Statistics show that oil and gas jobs in the U.S. shale regions are declining at the fastest pace since 2022. Meanwhile, Wood Mackenzie forecasts that global capital expenditure on oil and gas exploration will decrease by 4.3% this year to $341.9 billion, marking the first contraction since 2020. If Brent prices fall below $60, oil majors will struggle to maintain current capital spending and dividend distributions.
ConocoPhillips announced this week that it would cut a quarter of its global workforce, with reductions spanning all functions and regions. The company stated that the move aims to improve organizational efficiency, but the market interprets it as a typical response to industry-wide challenges. Similarly, Chevron announced a 20% reduction in its workforce back in February. Although related to cost integration following its acquisition of Hess, CEO Mike Wirth acknowledged that “a lot of things all went in one direction, and it was a negative direction” in the last quarter of 2024.
According to Reuters, 22 U.S.-listed oil companies, including ConocoPhillips, Diamondback Energy, and Occidental Petroleum, have collectively cut $2 billion in quarterly capital expenditures. Kirk Edwards, CEO of Permian Basin operator Latigo Petroleum, remarked that the industry has shifted from “drill, baby, drill” to “wait, baby wait,” warning that job cuts in the shale regions are a “flashing red warning light for the entire U.S. oil and gas industry.”
Although analysts are broadly bearish on oil prices, history suggests that a rebound could be triggered by the reversal of a single market variable—such as U.S. shale output, which has already declined from 13.6 million barrels per day last December to 13.4 million barrels per day by the end of August. The industry winter may persist, but cyclical patterns indicate that a bust is always followed by a boom.
