Oil and Gas Industry Trends for Q4 2025

Although OPEC+ crude production is starting to plateau, it’s already sowed the seeds for an oil supply glut. Their production surveys showed it pumped roughly 29 million barrels per day in November, not much different from October. Excess supply means discounted oil stocks will likely get even cheaper next year. Rystad expected a crude surplus of 1 million barrels per day by the end of this 2025 that may only widen by Q1 2026. As we begin the new year, strong supply will meet slowing seasonal demand amid a real supply glut risk.

This article was adapted from the report Industry Pulse: Oil and Gas Q4 2025, written by the Morningstar Equity Research team. Download the full report for free.

Activity is entering a new phase as smaller and medium-size players seek scale. From 2023 to early 2025, consolidation was headlined by large E&Ps, including Exxon, Chevron, Oxy, Conoco, and Diamondback, who sought high-quality inventory. Most larger firms will likely focus more on delivering anticipated synergies from targets, while others, like Oxy, have focused on deleveraging; Diamondback has already said not a lot of potential inventory competes with its core assets today. Still, while Diamondback’s consolidated a lot of the best Midland inventory following the Double Eagle acquisition, it also has expertise in the Delaware Basin that could continue propelling its acquisition flywheel forward.

Though smaller, uncovered names should drive most of the inorganic growth activity next year, narrow-moat Devon could become either consolidator or target, though we think Devon’s size and attractive relative valuation make it a better acquisition target. While M&A closures have slowed since last quarter, Antero will increase exposure to its core Marcellus Shale with its proposed acquisition of HG Energy at an attractive valuation; we think synergies look achievable given overlapping acreage.

US oil rig count continues its slide from last quarter. Accumulating crude production and slowing seasonal demand means the WTI benchmark could fall below the $55/bbl watermark early next year. Still, US operators may prove more resilient than what market expectations currently bake in. Rystad expects Lower 48 production, excluding the Gulf, to rise to 11.4 million barrels per day, driven by wells brought online in 2025.

Global oil rig counts have slid steadily since the first quarter of 2023, reflecting continued producer caution amid challenging oil prices. This battered the price of the Philadelphia Oil Service Sector Index for most of 2025, though the index rallied in the fourth quarter. Looking deeper and continuing a multi-month trend, Saudi’s oil drilling rigs continued their downward slide, testing prior lows. Still, we think a bottom is approaching as some rigs should come online next year; this should help the long-term opportunity in SLB.

Our global energy coverage now trades at a 5% discount to fair value. This compares with a 3% discount during our prior publication. We base this assessment on an aggregate, market-cap-weighted basis. Of 55 energy stocks we cover, 18 now trade at undervalued 4- or 5-star prices, including the following names we like.

Business optimization, capital recycling from divestitures, lower taxes, and low-cost production all translate to strong free cash flow. Management should return most of it to shareholders, including through undervalued buybacks.

Despite near-term cyclical weakness, we like SLB’s long-term offshore project opportunity, its digital investments, and its upside from a successful integration of ChampionX.

Sitting in the core Midland Basin, Diamondback has solidified its position as the lowest-cost independent producer that we cover. We like Diamondback because of its strong execution track record and meritocratic culture.

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Other sections of the report include:

• Capital Spending
• Crude Oil Overview
• Natural Gas and NGLs Overview