Monday Macro View: Is the Global Oil Sector Deteriorating?

The oil and gas sector has entered 2025 facing a difficult question: is this a moment of temporary adjustment—or are we watching a broader structural deterioration? According to the IEA’s latest World Energy Investment report , global upstream investment in oil and gas is set to fall by 4% this year—the first decline since 2020. Oil investment alone is projected to drop by over 6%, with sharp pullbacks in U.S. shale leading the contraction. Refinery investment is falling to decade lows. But data from Canada, Guyana, Brazil and especially the U.S. indicate stability if not growth.

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Several drivers are at play. Oil prices have weakened , service costs remain sticky, and investors continue to prioritize capital returns over output growth. Activity in high-cost, high-decline segments like U.S. tight oil is most vulnerable. The IEA notes that investment in new tight oil developments could fall by as much as 10% this year, with no corresponding rise in exploration or frontier plays to offset it. Meanwhile, refiners are slowing buildouts, and global net refining capacity is set to remain flat in 2025—despite demand resilience in key transport fuels. The capital cycle is clearly stalling, and that’s not just a shale story.

The new IEA report shows fossil‑fuel investment dipping for the first time since 2020, falling about 2 percent to around USD 1 trillion in 2025. That drop isn’t driven by optimism—it reflects weaker oil prices, rising costs, tariffs and fears of oversupply. Upstream oil and gas capex is set to fall around 4 percent, with investment in U.S. tight oil declining by up to 10 percent this year. At the same time, majors are allocating more cash to dividends and buybacks than to growth, and independents are winding down investment even amid M&A activity. But, so far, production hasn’t collapsed, but without fresh investment, tomorrow’s growth could be constrained. The IEA warns that rising costs mean lower activity from a given level of capex, effectively eroding investment impact by an estimated 8 percent.

IEA speaking about the financing aspect shows that outside the OECD, the outlook for financing face some headwinds. Emerging markets—excluding China—are capturing less than 10 percent of clean energy investment growth, with capital flows hampered by high interest rates, macro volatility and limited project pipelines. That increases the burden on international banks and multilateral institutions just as energy security concerns mount globally.

Meanwhile, Big Oil profits, while still robust in absolute terms, are shrinking—some producers dipping into cash reserves to keep buybacks rolling. That suggests internal belt‑tightening is under way. When sustained profits shrink, capex often follows. A recent dip in global crude prices into the mid‑$60s, combined with OPEC+ ramping output, dims U.S. producers’ appetite for new completions—even though refinery margins near 12‑month highs. The mismatch between earnings and field deployments is a quiet signal that market players expect tougher times ahead. We have talked about projections about Primary Vision's Frac Job Count in our previous article.

Furthermore, U.S. upstream investment is diverging across regions. Permian tight‑oil remains the No. 1 focus, but there’s visible retrenchment elsewhere—from DJ to Eagle Ford. Rig counts and frac‑spread activity have flattened, even as global producers add barrels. OPEC+ isn’t sitting on its hands: Saudi and the UAE will add roughly 167,000 bpd each in the summer months, with Russia, Kuwait and Iraq contributing another 100,000 bpd. What’s striking is the rising gap between marketed and active horsepower. Service fleets haven’t been retired. Our data shows that if margins recover , there is enough horsepower that can redeployed fast. But with upstream capex down, global headwinds on the horizon and financing constraints in emerging markets, operators are holding their fire.

To test whether the global oil and gas complex is deteriorating, we’d need to layer these findings onto real field‑level data: For instance look at Canadian oil sands. According to S&P Global Commodity Insights , oil sands production is expected to reach a record 3.5 million b/d in 2025, a 5% increase over 2024. This marks the fourth consecutive upward revision to the outlook, underscoring how optimization—not greenfield expansion—is driving growth. Operators are tapping into latent capacity and debottlenecking legacy assets, enabling output increases even in a lower price environment. W ith average breakevens near $27/b WTI, these projects remain resilient despite weaker market conditions. If prices stay above $40, further production gains seem likely, although export bottlenecks and pipeline constraints could emerge as limiting factors in 2026 and beyond.

Meanwhile, Brazil—an increasingly important non‑OPEC producer—is gearing up for meaningful growth in 2025. The Brazilian Petroleum Institute projects output will hit around 3.6 million bpd next year, up roughly 6 percent from current levels. This expansion is driven by a wave of new offshore subsalt developments and open acreage auctions. Notably, Petrobras plans to deploy three new FPSOs (Almirante Tamandare, P‑78, Alexandre de Gusmão), targeting fields like Buzios, Mero, and Bacalhau—each boasting capacities of 180–225 k bpd. Equinor and smaller independents such as Brava Energia and Prio are also contributing, with Prio set to double its output to over 200 k bpd by 2026 from acquisitions like Wahoo and Peregrino.

Source: Brazilian Oil Output

Looking beyond 2025 , Guyana’s basi, another important player, remains a growth juggernaut: ExxonMobil reported its “energy superpower” trajectory aiming at 1.3 million bpd by 2027, with longer-term stretch targets of 1.7 million bpd by 2030. The development pipeline is rich: the Liza series (Phase 1 & 2), Payara/Prosperity, Yellowtail, and upcoming projects like Hammerhead and Longtail intend to add 150–250 k bpd each over the next few years.

Source: Oil Now

Therefore, right now the data suggests a world in checkpointed pause—good enough to prevent a crash, but weak enough to stymie growth. Oil and gas are still moving, but growth isn’t. That’s the real test of “deterioration.” Not a sudden crash, but a narrowing path. And based on these trends, the sector seems to be holding strong - waiting for the right opportunity.