Oil prices edge up amid escalating tensions in Europe and Middle East.

Oil prices rose 0.4% and 0.3% for Brent and WTI respectively, supported by geopolitical tension in Europe and the Middle East. However, concerns about oversupply and the impact of trade tariffs on fuel demand limited gains. Tensions flared in the region with Russia threatening Poland, Ukraine stepping up drone attacks on Russian energy infrastructure, and Western nations recognizing Palestinian statehood.

Oil prices have seen a slight uptick, with Brent and WTI rising by 0.4% and 0.3% respectively, amidst geopolitical tensions in Europe and the Middle East. However, concerns over oversupply and the potential impact of trade tariffs on fuel demand have limited the gains. Tensions in the region include Russia's threat to Poland, Ukraine's drone attacks on Russian energy infrastructure, and Western nations recognizing Palestinian statehood.

Despite these geopolitical uncertainties, the oil and gas industry is adjusting its capital spending and production plans for 2025. According to the latest data from Oil & Gas Financial Analytics, LLC, the total estimated capital expenditure (capex) for 2025 is expected to be $60.1 billion, a 4% decrease from the $62.1 billion spent in 2024. This reduction is primarily driven by worries about lower oil prices and potential tariffs.

The reinvestment rate, which is the percentage of cash flow apportioned to capital spending, has risen to 70%, a five-year high. This indicates that producers may need to cut investment or increase debt to sustain shareholder returns as crude prices continue to erode. The capital investment allocated per unit of production has also decreased, with the capex per boe of production projected to fall from $12.73 in 2023 to $10.43 in 2025.

Oil-weighted E&Ps are expected to spend $23.4 billion in upstream capex in 2025, a 3% decrease from 2024. The investment intensity for this group is expected to fall by 15% to $11.62/boe. Eight of the 13 companies in this peer group are cutting capex, while three are increasing outlays. HighPeak Energy, for instance, is shifting focus to free cash flow generation and debt reduction, announcing a $180 million reduction in capex.

Diversified E&Ps are expected to spend $25.8 billion in 2025, a 7% decrease from 2024. The investment intensity for this group is projected to fall by 9% to $14.80/boe. Eight companies are expected to lower their capex budget in 2025, with six increasing and one keeping outlays flat.

Gas-weighted E&Ps are expected to spend $10.6 billion in 2025, on par with 2024 results. The investment intensity for this group is expected to remain relatively flat at $5.65/boe. Four companies are expected to increase outlays, with Comstock Resources and Coterra Energy leading the way with double-digit capex increases.

Overall, the oil and gas industry is taking a conservative stance on future spending, with a focus on debt reduction and maintaining free cash flow. The impact of geopolitical tensions and concerns over oversupply will continue to shape the industry's capital spending and production plans in the coming years.