Global upstream oil and gas capital expenditure: Global upstream capex is expected to normalize to price-implied levels in 2026, with structural reinvestment needs supporting a more durable offshore-led cycle.

Overview

JPMorgan's survey of global upstream investment finds that 2026 spending is returning to historical levels implied by prior-year oil prices after undershooting them in 2023–25. The report views this as a disciplined, structurally supported reinvestment normalization, with a constructive medium-term outlook for offshore development and oilfield services.

Core views

JPMorgan estimates global upstream capital expenditure of about $330 billion in 2026, broadly flat year on year. This is materially stronger than its February estimate of about $310 billion and a roughly 3% decline. After spending fell below the historical relationship with prior-year Brent during 2023–25, the 2026 estimate is broadly aligned with that long-run relationship. The report characterizes the shift as normalization toward sustainable reinvestment rather than a return to the aggressive commodity-led spending cycles seen before 2015. It attributes the firmer investment floor to stronger balance sheets, reserve-replacement requirements, energy-security priorities and better project economics. The structural resource-renewal need is central to the thesis. Wood Mackenzie estimates that production from the current commercial portfolios of 30 major E&P companies could decline by nearly 40% between 2025 and 2040. JPMorgan argues that mature portfolios therefore require continued spending to sustain production, replenish resources and extend portfolio life. This supports investment even when the immediate oil-price signal is weaker, particularly in large, long-life deepwater and strategic domestic-resource opportunities. Investment behavior differs materially by operator type. IOC upstream capex is expected to decline only about 3% year on year to about $95 billion in 2026 despite an approximately 15% decline in prior-year oil prices. The report notes that the historical IOC capex relationship with prior-year oil prices weakened from an R² of 0.87 before 2015 to 0.04 since 2015, reflecting through-cycle capital frameworks, long-cycle commitments and shareholder-return priorities. Average proved reserve life across JPMorgan's IOC universe is now about nine years, roughly 18% below decade-ago levels, creating a firmer lower bound for investment. US IOCs remain more oil-price-sensitive than European and international peers, with historical correlations of about 0.59 and 0.29, respectively. NOC upstream spending is expected to rise about 4% year on year to roughly $159 billion in 2026, despite the weaker prior-year oil-price backdrop. JPMorgan sees NOCs as increasingly governed by a dual mandate: maintaining and rebuilding productive capacity while improving energy security and reducing concentrated external supply dependence. NOC capex historically had a relatively strong relationship with commodity prices, with an R² of about 0.73, so the 2026 outcome is viewed as a positive deviation from the price signal. In Asia Pacific, where Wood Mackenzie estimates more than 75% of 2026 production comes from mature and mid-life fields, natural decline, infrastructure limits and project lead times make reinvestment necessary even when higher prices alone cannot quickly raise supply. Independent E&P spending is more fragmented. JPMorgan estimates independent upstream capex will fall about 3% year on year to roughly $77 billion in 2026, with international independent capex down about 5% as projects including Barossa, Pikka, Scarborough and Trion move beyond peak investment. The report interprets this as project-cycle maturation rather than a broad loss of investment appetite. In North America, private-led activity has improved: the Enverus US rig count rose 17%, or 91 rigs, from February 28 to 636 on September 8. JPMorgan forecasts the Baker Hughes US rig count to average 574 in 2026 versus 562 in 2025, then rise 7% to 613 in 2027 and 2% to 623 in 2028. The offshore outlook remains a major constructive thread. Wood Mackenzie data indicates a stronger final-investment-decision pipeline through the second half of 2026 and especially 2027, led by offshore conventional and deepwater projects. JPMorgan highlights a second Southeast Asian deepwater gas investment wave targeting about 28 tcf, or about 5 billion barrels of oil equivalent, and renewed Nigerian deepwater activity, including Exxon’s $7–8 billion Owowo project, which could reach FID as early as the following year. The report believes that broadening activity across deepwater basins, combined with the need for large-scale and long-life resource additions, supports medium-term offshore investment. For oilfield services, JPMorgan remains constructive on European offshore-service providers because a broadening deepwater opportunity set and strengthening sanctioning pipeline should support backlog replenishment, order intake and revenue visibility. It has also adopted a more constructive stance on North American OFS coverage as upstream-spending tailwinds emerge. Looking ahead, Wood Mackenzie expects investment across its peer group to rise about 5% in 2027, with upstream receiving a greater share of total capital; most operators are expected to enter 2027 with gearing below 20%. JPMorgan therefore expects higher upstream allocation, exploration reloading and resource capture while capital discipline and shareholder distributions remain intact.

Analysis framework

JPMorgan combines a survey of roughly 75 IOCs, NOCs and independents with a broader proprietary global upstream-capex model covering close to 175 E&P companies. It compares projected spending with historical prior-year Brent relationships, separates behavior by operator type and geography, and uses company-reported capex, guidance, JPMorgan equity-model forecasts and Wood Mackenzie estimates where company disclosures are insufficient. The survey excludes downstream spending and focuses on exploration, development and production costs relevant to oilfield-services demand.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Comparison of upstream capex with prior-year Brent oil prices

  The report compares current and historical upstream spending with the previous year's oil-price backdrop to distinguish price-driven spending from structural reinvestment.

• Other

  Global upstream capex survey and historical correlation analysis

  JPMorgan aggregates company spending data and guidance, supplements gaps with analyst and Wood Mackenzie estimates, and uses correlations and residuals versus historical price-implied capex to assess investment behavior.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• European oilfield services

  The report sees a favorable setup from expanding offshore and deepwater development, supporting backlog replenishment and revenue visibility.

  Strengths

  Broadening global offshore opportunity set, healthy forward project pipeline and order momentum.

  Comparison

  YTD announced orders track only modestly below the strong 2023 level.

  Risks

  Project sanctioning and development timing remain relevant.

• North American oilfield services

  Upstream-spending tailwinds and improving US land activity support a more constructive outlook.

  Strengths

  US rig activity has recovered from the February trough, and public E&Ps are beginning to plan for 2027 growth.

  Weaknesses

  Activity remains private-led and public E&P planning is still early.

  Comparison

  The current Baker Hughes US rig count of 591 was 7% above the 2Q26 average and 8% above the 1Q26 average.

  Risks

  Activity remains dependent on operator capital plans and the oil-price backdrop.

Key data

• Global upstream capex, 2026~$330BBroadly flat year on year; versus JPMorgan's February estimate of ~$310B and a ~3% decline.
• IOC upstream capex, 2026~$95BExpected to decline ~3% year on year despite a ~15% decline in prior-year oil prices.
• NOC upstream capex, 2026~$159BExpected to rise ~4% year on year, reversing the decline from the ~$182B 2023 peak.
• Independent upstream capex, 2026~$77BExpected to decline ~3% year on year.
• Production decline from current portfoliosNearly 40%Wood Mackenzie estimate for 30 major E&P companies between 2025 and 2040.
• Expected peer-group investment growth, 2027~5%Wood Mackenzie expects upstream to take a greater share of total capital.
• Average IOC proved reserve life~9 yearsAbout 18% below decade-ago levels.

Impact & implications

The report sees a more durable investment floor than the flat 2026 spending headline suggests. Structural portfolio renewal and security-driven NOC investment should support upstream activity through commodity volatility, while a strengthening offshore FID pipeline improves medium-term demand visibility for offshore equipment and services providers.

Risks

• Mature basins, infrastructure bottlenecks and project-development lead times may constrain the ability to translate energy-security priorities into materially higher near-term production.
• International independent spending is moderating as large projects move through peak investment phases.
• Capital discipline and shareholder-return frameworks continue to constrain a return to broad-based pre-2015-style IOC spending.

What to watch

• The pace of offshore and deepwater final investment decisions through the second half of 2026 and 2027.
• Whether NOCs convert capacity-renewal and supply-diversification objectives into exploration, development and partnership activity.
• US public E&P planning for 2027, including high-spec rig availability, upgrades and reactivation lead times.