Oil prices have surged once again amidst the intensifying conflict\ninvolving Iran. This price spike is simultaneously boosting investment\nwithin the sector.<\/p>\n
Initially, 2026 was expected to be a bleak period for global oil\ncompanies. An abundance of global supply had even raised concerns\nregarding a massive super-glut. Brent crude prices were previously\nprojected to fall below US$60 per barrel, after averaging around US$68\nper barrel in 202cap 2025 and US$80 per barrel in 2024.<\/p>\n
However, the escalation of war in the Gulf region has reversed these\nprojections. Disruptions to production and oil shipping routes have\npushed prices into triple digits. Some analysts now estimate that\naverage Brent prices could reach US$85 per barrel or more throughout\n2026. Prices could even breach US$120 per barrel if attacks on vessels\nin the Strait of Hormuz continue.<\/p>\n
Pressure on supply has also intensified after Saudi Arabia closed the\nEast-West pipeline\u2014a key alternative route for oil delivery\u2014on 11\nSeptember following drone attacks. Brent oil prices during trading on\nMonday (14\/9\/2026) at 17:11 WIB jumped 2.6% to US$107.4 per barrel,\nwhile WTI prices soared 2.7% to US$102.7 per barrel. Current oil prices\nare at their highest level since 15 May 2026.<\/p>\n
This continuous surge in oil prices is causing global anxiety, with\nglobal stock markets collapsing last week. While the world feels the\nsqueeze of rising oil prices, the industry itself is experiencing a\nwindfall. The price surge has become a major blessing for the global oil\nand gas industry.<\/p>\n
Since the beginning of the year, global oil and gas stocks have risen\nby an aggregate of approximately 40%. This figure far exceeds the 12%\nrise seen in the overall stock market. The financial performance of\nmajor oil companies has also surged. The combined profits of the seven\nlargest integrated oil companies in the West and Saudi Aramco reached\nUS$91 billion in Q2-2026, doubling compared to the same period the\nprevious year.<\/p>\n
However, experiences in the mid-2010s have made the industry more\ncautious regarding expansion. While capital expenditure (capex) did\nincrease after the Russian invasion of Ukraine pushed oil prices above\nUS$120 per barrel, cash flows grew even faster, and most surpluses were\nused to reduce debt and provide returns to shareholders. Part of the\ncapex increase at that time also reflected inflation in drilling and\nsupport service costs rather than a surge in production activity.<\/p>\n
This time, with cash reserves accumulating again due to the Gulf war,\noil companies may not be able to maintain a conservative stance. This\nsituation could pave the way for a wave of exploration and acquisitions\nthat could shape the industry\u2019s direction until the end of the\ndecade.<\/p>\n
So far, oil companies are still using much of their additional\nprofits to strengthen balance sheets, provide shareholder returns, and\nslightly increase production from existing assets. Following the\ninvasion of Ukraine, companies used most of their extra cash flow to\nrepair their balance sheets. However, about 18 months before the Gulf\nwar, when oil prices weakened again, companies began increasing debt to\nmaintain investor payments and finance planned capital expenditure.<\/p>\n
Now, the situation has reversed. In Q2-2026, five major oil\ncompanies\u2014ExxonMobil, Chevron, Shell, BP, and TotalEnergies\u2014cut their\ncombined net debt by US$36 billion, or nearly 20%. Smaller companies\nhave been even more aggressive in cutting debt, as they generally carry\nhigher leverage.<\/p>\n
Prior to the outbreak of war with Iran, investors were bracing for a\ndifficult period. Major oil companies had even announced a combined\ndecrease of approximately 11% in shareholder distributions, primarily\nthrough the suspension of share buyback programmes. The surge in oil\nprices has since changed the situation. Almost all major oil companies,\nexcept for BP, have maintained or increased dividends and buybacks.\nSmaller companies have also begun offering not only special dividends\nbut regular payments.<\/p>\n
Nevertheless, after debt repayment and investor distributions, the\nfunds remaining for expansion are still limited. The aggregate cash\nposition of major oil companies remained almost unchanged between\nQ4-2025 and Q2-2026, while executives emphasised that most of the extra\nprofits in 2026 will continue to be returned to shareholders. An\nexception is seen in Diamondback Energy, as well as large private\ncompanies such as Continental Resources and Hilcorp Energy, which have\nbegun financing short-term projects, such as completing existing wells\nin the US shale region.<\/p>\n
As oil reserves dwindle, oil giants are rethinking their strategies.\nSustained high oil prices are beginning to alter the calculations of\nenergy companies. If these price levels persist, new projects will\nbecome more economically viable, while the need to replenish reserves\nbecomes increasingly urgent. This is because production from ageing oil\nfields continues to decline. Wood Mackenzie estimates that global oil\nand gas production could decrease by up to 31 million barrels per day by\n2040, nearly one-fifth of current production. Approximately 70 companies\neven face the risk of losing half of their production.<\/p>\n
This condition is forcing oil companies to update their asset\nportfolios. The surge in oil prices now provides them with the cash flow\nand stronger balance sheets needed to begin moving. One pathway is\nexploration. Although budgets have not yet surged significantly, major\ncompanies are beginning to secure vast exploration areas and are\nutilising AI to search for new opportunities.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/oil-prices-explode-energy-giants-pour-funds-into-expansion-1789387067", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }