Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTAlex KimaniFri, July 31, 2026 at 12:00 AM GMT+2 4 min readWood Mackenzie now estimates that the global upstream oil and gas sector could generate $495 billion in free cash flow in 2026 if crude averages $90 per barrel, more than doubling its previous forecast based on a $60 oil price assumption. The revision follows the sharp jump in crude prices triggered by the Middle East conflict, turning what had been expected to be another year of disciplined cash generation into one of the industry's most lucrative windfalls in recent years. Yet the gains will be concentrated among the world's largest producers, with the 49 national and international oil companies covered by Wood Mackenzie expected to capture $272 billion of the total.Wood Mackenzie expects the conflict to reduce global oil production by at least 3%, with Iraq accounting for roughly 3 million barrels per day of lost output, while damage to infrastructure in Qatar is projected to cut global LNG supply by 2%. The stronger cash flow outlook does not alter the industry's longer-term production trajectory. Wood Mackenzie projects average production across the 155 upstream companies it tracks will fall 30% between 2030 and 2040, with more than 70 producers facing declines of more than 50% unless they make significant new investments.However, WoodMac says energy companies are likely to maintain capital discipline despite the unexpected influx of cash, with capex budgets expected to largely remain flat while share buybacks are projected to decrease by 5% as boards prioritize balance sheet strength and deleveraging. Related: War Sends Saudi Oil Output Down and Revenue UpMeanwhile, energy companies are expected to continue to deploy the excess cash to purchase attractive oil and gas assets. Upstream M&A surged to a two-year high in the first half of the year, including Shell Plc's (NYSE:SHEL) $16 billion acquisition of ARC Resources, Devon's (NYSE:DVN) $25 billion merger with Coterra and Mitsubishi's (OTCPK:MSBHF) $7.5 billion purchase of Aethon. Dealmakers are increasingly prioritizing stable, low-cost regions and natural gas/LNG assets to ensure supply chain security. "What is perhaps most telling about the corporate response to the turbulent macro forces impacting the oil and gas sector is just how little changed. Most players have adopted a wait-and-see approach to the market turmoil, preferring to accumulate cash on the balance sheet rather than return it to shareholders or increase investment. Capital discipline has proved more durable than either the bears or bulls expected," said Tom Ellacott, Senior VP of Corporate Research at WoodMac. Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info