At Any Rate Global Commodities: Global upstream Oil & Gas capital spending faces first contraction since 2020
Jul 3, 2025
Global upstream oil and gas spending is set to decrease for the first time since 2020, with a predictable fall across various regions except the Middle East. U.S. shale spending is experiencing a decline, compounded by rising tariffs on essential materials. Nonetheless, oil liquids production is projected to rise significantly in the coming years, buoyed by strategic hedging during price spikes. The podcast delves into the shifting dynamics in global oil production and investment, highlighting the dramatic drops in drilling activity and the focus on efficiency improvements.
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Global CapEx Contracts Except Middle East
- Global upstream oil and gas capital spending is expected to decrease by 1.1% in 2025 to $543 billion, the first contraction since 2020.
- All regions except the Middle East will see spending cuts; the Middle East investment is rising nearly 5%, reaching an all-time high.
U.S. Shale Spending Faces Cost Inflation
- U.S. shale sector capital spending fell 3% in 2024 and is forecast to decline further by nearly 2% in 2025 despite rising costs.
- Tariffs on steel and products inflate costs, making this a very unusual cycle where costs rise even as prices decline.
U.S. Shale Hedging Boosts Production Outlook
- A significant hedging surge occurred during the mid-June 2025 oil price spike from the Israel-Iran conflict, primarily in the U.S. shale sector.
- About 38% of 2026 U.S. crude production was hedged at an average WTI price of $67, supporting higher production.