US upstream: Key themes to watch in 2025

The upstream US oil and gas sector faces a landscape marked by volatility and opportunity in 2025.

With shifting market dynamics, analysts from S&P Global Commodity Insights Upstream Solutions have identified key themes that will shape the industry this year.

Crucial trends to watch:

1. Balancing act for oil-focused companies

In 2025, upstream-focused exploration and production companies may face significant challenges due to anticipated declines in oil prices. Commodity Insights analysts forecast West Texas Intermediate prices to hover around $65/b, creating a crucial juncture for these firms.

They will need to balance the funding return of capital programs with maintaining a strong balance sheet. The pressure to deliver both growth and returns will force companies to make difficult choices.

If prices remain low for an extended period, they may need to cut capital expenditures to preserve cash flow.

2. A shift in fortune for gas-focused companies

In contrast to their oil counterparts, gas-focused companies are expected to experience a substantial increase in natural gas prices, with forecasts from Commodity Insights analysts suggesting an average of $4.25/MMBtu.

This shift allows gas operators to transition from maintenance mode to growth, enhancing returns to shareholders. However, gas companies are likely to adopt a cautious approach, waiting for sustained price increases above $4.00/MMBtu before significantly ramping up production.

3. M&A activity and market dynamics

Mergers and acquisitions activity within the US oil and gas sector is anticipated to remain subdued in 2025, largely due to a growing disparity between buyer and seller expectations amid oil price uncertainties. However, rising gas prices may spur an increase in gas-weighted transactions as companies seek to rebalance their portfolios. Favorable regulatory policies under the new administration could further influence the M&A landscape.

4. Impact of new government policies

US President Donald Trump is expected to implement policies that will favor the oil and gas industry. Initiatives like lifting the moratorium on new LNG export licenses and expediting infrastructure approvals could support higher demand. However, the industry may react cautiously, given current business models and the potential for oversupply.

5. Supply dynamics and market outlook

In 2024, US natural gas production likely declined relative to 2023, but there is optimism for a reversal in 2025 as prices are expected to increase due to several LNG projects coming online in the second half and into 2026. Lower 48 onshore oil production in 2024 remained relatively unchanged from 2023, but oil markets are expected to become oversupplied in 2025 due to anticipated OPEC+ production increases, potentially causing WTI prices to hover around $65/b over the next two years.

The upstream oil and gas sector in 2025 will be characterized by significant transformations as companies navigate fluctuating prices and evolving market conditions. The contrasting trajectories of oil and gas-focused companies highlight the complexity of the current landscape. Staying informed and agile will be crucial for stakeholders as they adapt to these changes.

Further Read: 2025 North American upstream themes