Rising crude oil prices driven by the Middle East conflict could significantly increase profits for global energy producers. Wood Mackenzie estimates the upstream oil and gas sector may generate $495 billion in free cash flow during 2026. The forecast assumes crude oil averages $90 per barrel.
Higher Oil Prices Lift Cash Flow Forecast
Wood Mackenzie more than doubled its previous forecast based on a $60 per barrel assumption. The firm said higher oil prices have transformed expectations for the industry. Consequently, producers could experience one of their strongest financial years in recent history.
The report estimates that 49 major national and international oil companies will capture $272 billion of total free cash flow. Meanwhile, the Middle East conflict is expected to reduce global oil production by at least three percent.
Wood Mackenzie projects Iraq could lose around three million barrels of daily production. Additionally, damage to infrastructure in Qatar may reduce global liquefied natural gas supplies by two percent.
Long-Term Challenges Still Remain
Despite stronger earnings, Wood Mackenzie expects companies to maintain financial discipline. Capital expenditure budgets will likely remain largely unchanged. Furthermore, the report forecasts a five percent decline in share buybacks as companies prioritise stronger balance sheets.
The consultancy also warned that long-term production challenges remain. Average output across 155 upstream companies could decline by 30 percent between 2030 and 2040. Moreover, more than 70 producers may face production declines exceeding 50 percent without major new investments.
Meanwhile, analysts believe the current oil price surge offers significant short-term financial gains. However, sustained investment will remain essential to secure future production capacity.
