The Economic Times·2026-01-14 05:18Core Viewpoint - The oil sector's recent outperformance compared to commodity prices may not be sustainable, with potential challenges expected by 2026 [1]. Group 1: Market Performance - Last year, both West Texas Intermediate (WTI) and Brent crude prices fell by approximately 20%, yet shares of major international oil companies increased between 4% and 18% [2][10]. - The top five international oil companies are projected to generate nearly $96 billion in free cash flow in 2025, despite WTI averaging just under $65 per barrel, comparable to 2008 levels when WTI averaged over $99 [6][11]. Group 2: Cost Management Strategies - Oil executives are focusing on significant cost reductions, including workforce cuts of up to 20% at companies like Chevron and Shell [4][10]. - By minimizing operational and project expenditures, companies have managed to mitigate the effects of declining commodity prices [6][10]. Group 3: Financial Resilience - The sector has benefited from reduced debt levels following the commodity windfall from 2021 to 2023, allowing companies to maintain dividends and buybacks, except for BP [8][11]. - Despite these measures, the current average of $58 per barrel for WTI in 2023 indicates potential further declines in free cash flow, compounded by lower natural gas prices and weaker refining and chemical margins [9][11].