With the end of the year only a few short weeks away, upstream oil and gas companies are turning to the annual market forecast from industry experts to plan for the 2026 year ahead. The upstream sector has faced a troublesome 2025 and is in need of some much-deserved relief. However, industry watchdogs and analysts have warned of potential cuts in spending for 2026. The war in Ukraine has devastated the region as well as the global oil and gas markets, with several nations across the world reporting serious issues meeting demand and securing supply for the year to come.
Market analysts point to a rough 2026 for the upstream oil and gas sector
Whenever this time of the year rolls around, the myriad of energy companies, both big and small, turn to market forecasts from companies like Wood Mackenzie to plan for the year ahead. After a fluctuating market performance this year, due to oil and gas from the Russian energy market facing increasing and consistent sanctions by the West, the end of the year has revealed that experts are warning of significant cuts in spending for the year ahead.
The uncomfortable reality is that this year’s trend in the oil and gas sector is struggling to meet demand without Russian energy resources. That, coupled with a reduction in upstream investments across several nations, has led to the sector facing a poor performance in 2026. That’s without the consideration of the renewable energy sector increasing its footprint across the world.
The global energy community is diversifying its portfolio as the renewable energy sector gains momentum
The cuts in spending across the upstream sector have led to more populations in several countries looking towards the renewable energy sector. Several European nations have seen huge clean energy projects being commissioned in 2025, with more to come as the world aims to meet its decarbonization goals by 2030.
Wood Mackenzie warns of a tough start to 2026 for oil and gas companies
Wood Mackenzie has become the industry leader in its forecast for the energy sector. Its Corporate Strategy & Analytics Service (CSAS) is specifically designed to help oil and gas companies and their shareholders anticipate and navigate the treacherous waters of 2026 planning and capital allocation. And the company has warned of increased cuts in spending by upstream oil and gas companies in 2026.
“Oil and gas companies are caught between competing pressures as they plan for 2026. Near-term price downside risks clash with the need to extend hydrocarbon portfolios into the next decade. Meanwhile, shareholder return of capital and balance sheet discipline will constrain reinvestment rates.” – Tom Ellacott, Senior Vice President, Corporate Research at Wood Mackenzie
The wave of sanctions against Russian energy companies has led to significant pressure on the global energy market as the world plans for the inevitable phasing out of Russian oil and gas. Wood Mackenzie has identified several potential key investment themes for 2026, including but not limited to:
- Prospect hopper reloading ahead of a renewed exploration drive
- opportunistic M&A to extend oil and gas longevity
- vertical integration to unlock additional value whilst enabling fresh opportunities
2026 is set to become the start of a new future for the energy industry
The anticipated cuts in spending across the upstream energy sector for oil and gas companies point to a transitional energy market in 2026. The inevitable phasing out of Russian energy resources, be it oil or gas, has been accelerated by the news that the EU’s energy ministers have approved a plan to fully withdraw from the Russian energy market and cut ties with Moscow as an attempt to force Putin to end his “special military operation” in Ukraine. The forecast calls for oil and gas companies to modernize their portfolios in 2026 and beyond.
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