Major oil and gas companies are preparing to report modest gains in third-quarter earnings, but the focus among analysts is increasingly on how these firms are positioning for the year 2026. While a slight uptick in crude prices and stronger refining margins may boost results in the near term, the deeper strategic question centres on how the so-called supermajors are managing costs, debt, divestments and capital allocation in the face of a looming oversupply and flat demand environment.

Near-Term Gains Amid a Challenging Backdrop

This quarter, firms such as Shell plc and TotalEnergies SE are expected to show increases in adjusted net income of around 18% and 11% respectively compared with the previous quarter, though both remain below year-ago levels. The marginal improvement is underpinned by slightly firmer oil prices and improved margins in refining and integrated gas businesses. Yet the macro picture remains far from benign: crude benchmarks such as Brent have slipped 13% year-on-year in Q3, while gas prices in the US fell roughly 12% over the same period.

Upstream producers have contended with elevated supply from both OPEC+ and non-OPEC sources, while sluggish demand growth has compounded the pressure. Analysts note that the near-term earnings lift amounts more to a tactical recovery rather than a return to strong profitability. For many companies, the earnings season will serve as a bridge to disclosures around next-year planning, cost rationalisation, asset sales and capital discipline.

Beyond the headline numbers, attention is focused on how oil majors are reconfiguring their businesses for the next phase. TotalEnergies, for example, has flagged that higher production and robust refining margins will drive this quarter’s results. At the same time it has disclosed plans to cut share buybacks, trim capital expenditure and divest mature hydrocarbon and power-business assets, following an 89% surge in debt in the first half of the year.

Meanwhile, in the United States, Chevron Corporation has closed its US$55 billion acquisition of Hess Corporation and is expected to report adjusted profit around US$3.4 billion. The call will provide an important signal of how well the integration is proceeding and what future operating synergies look like. For Exxon Mobil Corporation the narrative is similar: stronger refining results may lift earnings by up to US$700 million this quarter, while analysts expect the company to reduce its early-stage growth capex and steer resources toward higher-return core assets.

These portfolio shifts reflect a deeper-lying trend: major producers are placing greater emphasis on business models that reward asset quality, capital discipline and cash-return to shareholders. They are less focused on growth for growth’s sake and more on ensuring resilience under a market where sustained commodity tailwinds are no longer a given.

Why 2026 Has Become the Focal Point for Investors

The year ahead is fast becoming a defining moment for the industry. Forecasts anticipate a substantial global supply surplus through 2026, driven by increasing production from key growth regions and non-OPEC players. For instance, global liquids production is projected to rise by 2–3 million barrels per day across 2025–26, while demand growth is expected to remain weak. From an earnings perspective, that means pricing power may be further constrained, underscoring the importance of efficiency, refineries and non-upstream earnings streams.

In this context, analysts are asking: what are the majors doing to adapt to a scenario of weaker price support? Cost-structure reform, divestment of non-core assets and improved downstream performance are viewed as meaningful levers. Refining margins, for example, may provide critical buffer zones—but only if companies can sustain throughput and avoid margin erosion. For oil-majors that have enjoyed multi-year price tailwinds, the shift to structurally weaker commodity fundamentals demands a sharper strategic response.

Investor Outlook and Strategic Risks Ahead

From an investor standpoint, the near-term earnings improvement matters—but the strategic moves will shape value through 2026 and beyond. If oil companies deliver credible updates on debt reduction, asset rationalisation and capex discipline, they may receive renewed support. But if the macro environment deteriorates further, sustained earnings upside will be hard to come by.

Refining and integrated businesses will garner more interest as the upstream outlook remains clouded. The majors’ ability to generate free cash flow at lower commodity prices will be a critical differentiator. At the same time, investors will be watching for how companies manage long-term exposures to hydrocarbons amid decarbonisation pressure and shifting energy demand.

While the current earnings season may bring modest relief to an industry under pressure, the strategic narrative heading into 2026 may matter more to markets than any single quarter’s results. Oil companies are adapting—some cautiously, some aggressively—to a future where higher price assumptions are harder to justify, and resilience will count for more than growth.

(Adapted from Reuters.com)