2025 has been a challenging year for the global oil market, and 2026 could bring more headaches.
Softening demand will likely cause an oversupply of oil barrels in the coming year, resulting in lower oil prices, and offshore drilling rigs without firm work will struggle before day rates rise again, potentially in 2027.
On the other hand, operators are expected to drill a number of high-impact wells next year, and there may be an opportunity to contract rigs for 2027 programs at lower day rates, analysts from Westwood Global Energy Group said 13 November during a Houston briefing.
Mark Adeosun, Westwood’s director of subsea and PlatformLogix, said 2025 saw continued declining near-term demand, partially attributed to slowing Chinese imports of crude. And while OPEC+ had previously voluntarily cut supply to maintain oil prices, its members have been unwinding those cuts. At the same time, production has risen from other countries, he said.
“We find ourselves in more or less an impasse. That means for every barrel taken out, we are having an additional barrel coming in.”
These forces are combining to deliver an expected oversupply glut exceeding 3 million BOEPD in first-quarter 2026, he said.
Continuing incremental supply alongside seasonally soft demand combine to translate into the potential to cause significant oversupply in global oil markets that could reach COVID-19 pandemic levels, he said.
The upshot of that, according to Adeosun, is that while oil prices are now about $60/bbl, prices could drop into the $50s in 2026.
Operators have delayed final investment decision (FID) on offshore projects this year, citing project optimization, high supply-chain costs, project financing, and capex rationalization. Some notable FID delays include
- Eni’s Baleine Phase 3 in Cote d’Ivoire and Geng North in Indonesia—both deferred due to capex rationalization
- Repsol’s Polok and Chinwol development in Mexico—delayed for project optimization
- PTTEP’s Lang Lebah in Malaysia—impacted by high supply-chain costs
- Navitas’ Sea Lion in the Falkland Islands—slowed due to project-financing challenges
As of mid-November, he said, operators had sanctioned 33 projects, with 15 more expected to be greenlighted by year’s end, he said.
Some of this year’s FIDs include
- BP’s Tiber-Guadalupe and Beacon Offshore’s Shenandoah South developments in the US Gulf BP’s Ginger and Shell’s Aphrodite in Trinidad & Tobago
- ExxonMobil’s Hammerhead in Guyana
- Shell’s Gato do Mato and BW Energy’s Maromba in Brazil
- Var Energi’s Balder VI and Equinor’s Heidrun Expansion and Fram Sor developments in Norway
- TPAO’s Sakarya III in Turkey
- Shell’s Mina West in Egypt
- Eni’s Coral Norte in Mozambique
- Shell’s HI in Nigeria
- BP’s Shah Deniz in Azerbaijan
- QatarEnergy’s North Field Phase 2 in Qatar
- CNOOC’s Liuhua 28-2 in China
- PTTEP’s Block H phase 1B and Dialog Resources’ Baram Junior Cluster developments in Malaysia
- Petronas’ Hidayah in Indonesia
Next year could see as many as 60 projects receive the go-ahead.
Exploration Levels
Jamie Collard, exploration research manager at Westwood, said the industry has drilled more than 50 potentially high-impact exploration wells in 2025, with nearly 20 more expected by year’s end. The level is about half of that of 2010–2014 when oil was over $100/bbl, but the industry has racked up 17 notable finds this year.
Westwood defines high-impact exploration wells as those with pre-drill estimates of more than 100 million BOE of recoverables or any frontier play test.
BP’s Bumerangue in Brazil was that operator’s largest find in 25 years, and Petronas said its deepwater Megah discovery in Malaysia was its largest in 2 decades. The other notable high-impact finds this year include Petrobas’ Tortuga Leste, Talos’ Daenerys, BP’s Far South, Armstrong’s Sockeye-2, Aker BP’s Omega Alfa, CEP’s Wolin East, ExxonMobil’s Pegasus, Azule Energy’s Gajajeira, Galp’s Mopane-3X, Rhino Energy’s Capricornus, Oxy’s Baqiyah, TPAO’s Goktepe-3, KOC’s Jazah and Wara Burgan, and Murphy’s Hai Su Vang finds.
“The good news is that with fewer wells being drilled, it does appear that explorers have selected better prospects, better plays, lower-risk placement drilling, and we have seen a real increase in commercial success rates,” Collard said.
Even so, he said, there were “plenty more failures than successes,” given some finds were technically but not commercially successful.
Ultra-deepwater prospects in particular are less likely to move forward to the appraisal phase. While roughly half of the potentially high-impact wells are technically a success, between 20 and 25% of those in water depths less than 2,500 m are followed by appraisal drilling, he said.
Operators are only pursuing appraisal wells for about 10% of discoveries located in more than 2,500 m of water, he added. That represents “a lot of hundred-million-dollar wells where the results are unfavorable, unfortunately.”
Moving into 2026, drilling is expected to remain flat, but operators are planning to drill wells that could open up new plays, Collard said.
“There are plenty of interesting things going on next year to test geology,” he said.
Wells to watch in the remainder of 2025 include Oxy’s Bandit, Chevron’s Korikori, Petrbras’ Morpho and Ruba, TotalEnergies’ Olympe, Shell’s Falco, Morphy’s Civette, OMV’s Vinekh, Equinor’s Vikingskipet, and Kuwait Oil Company’s Riquah-3.
Throughout 2025, operators also laid groundwork for future exploration by scooping up acreage across the globe.
“It does seem that there is a theme, perhaps, towards equatorial margins,” he said.
Rig Focus
It is likely that offshore drilling rigs without firm work secured will struggle in 2026, said Cinnamon Edralin, Westwood’s Americas research director, while noting that with the difficulty in near-term demand for rig contractors, operators could pick up rigs at rates below those anticipated for 2027 and later.
Current near-term drillship day rates have been under $400,000/day while rates for later work are higher.
“We’re expecting 2027 to tighten up a good bit,” she said.
She expects planning for 2027 drilling campaigns to drive up the committed rig utilization, particularly for seventh-generation drillships. More than 40% of the competitive marketed supply of these drillships is booked for 2027. Of the 21 competitive drillships already booked for 2027, 10 have partial availability, and four hold options but no firm work for that year.
Overall, marketed drillship utilization rates for 2025 are 91%, and 94% for 2026 and 2027, according to Westwood. Marketed utilization for drilling semisubmersibles is 84% this year, 88% in 2026, and 92% in 2027.
The softening jackup market has brought down global day rates for those units, particularly as units suspended by Saudi Aramco competed for work, she said.
Edralin said jackup utilization rates are expected to rise slowly but steadily over the next few years, following this year’s utilization rate dip to 90%. In 2026 and 2027, competitive jackups are expected to see at least 91% utilization.
