Chevron and ConocoPhillips Trim Capex 10% as Occidental Cuts Permian Spending by Up to a Fifth
Chevron, ConocoPhillips and Occidental slashed first-half capex by 10-20%, diverting cash to shareholder returns and limiting the U.S. shale supply response to an impending global deficit.
Chevron and ConocoPhillips each cut spending by roughly 10% over the first half of 2026, while Occidental Petroleum reduced its operational budget in the Permian Basin by as much as a fifth over the same period, Bloomberg reported. The moves came as ICE Brent crude front-month held around $91 a barrel on Tuesday (2026-08-18), a price that in prior cycles would have generated aggressive drilling commitments from American majors.2
The IEA said in its latest monthly Oil Market Report that the global oil market is heading into a deficit of 1.8 million barrels daily. Three of the four biggest U.S. oil producers are simultaneously reducing the capital flowing into the basin that has driven most of America's production growth over the past decade.2
U.S. crude output hit a record 13.714 million barrels daily in May, the latest EIA data show. But that figure reflects past investment decisions. Enverus estimated in 2024 that well productivity across the shale patch had declined by some 15%, meaning the barrel yield per dollar of capex is not what it once was. Lower spending takes longer to show up as lost production than it did in earlier cycles.2
The scale of the prior shale growth era provides useful context. EIA data show U.S. production grew from 8.8 million barrels daily in December 2016 to 12.865 million barrels daily by January 2020, a gain of more than 4 million barrels daily in just over three years. That acceleration required sustained spending increases from the same companies now trimming budgets.2
ConocoPhillips' results show the early effect. The company's 2026 year-to-date production came in at 2.278 million boe/day, down from 2.391 million boe/day for the same period in 2025, its second-quarter results statement showed. Output is already declining year-on-year before the full weight of the budget cuts feeds through.1
Chevron's trajectory looks better on the surface. Its second-quarter 2026 production rose from 3.858 million boe/day in the first quarter and was substantially above the 3.396 million boe/day reported for the second quarter of 2025, per its results statement. But Chevron is among those reducing the capital budget, suggesting management has chosen to harvest existing production rather than drill forward aggressively.1
ExxonMobil sits apart from both. The company posted record Permian production of more than 1.8 million boe/day in the second quarter, according to its results statement, and led U.S. majors overall at 4.514 million boe/day. Upstream earnings jumped from $5.737 billion in the first quarter to $7.927 billion in the second, with year-to-date 2026 upstream earnings reaching $13.664 billion, the statement showed.1
The divergence between Exxon and its peers is not simply a matter of differing price outlooks. Exxon's Pioneer acquisition concentrated a large acreage position in core Midland Basin inventory with productivity that the other majors cannot easily replicate. Occidental is cutting Permian operations spending by up to a fifth while Exxon pushes the same basin to volume records.1,2
Bloomberg reported that companies pulling back plan to redirect higher oil revenues to debt reduction and shareholder returns. With well productivity already trending lower across the patch, that allocation makes financial sense under current assumptions. But it caps how quickly the shale industry can respond if prices move higher or the IEA's deficit projection proves conservative.2
The mechanism matters for market timing. Spending decisions made in the first half of 2026 take months to translate into completions, and rigs released from contracts are not quickly reactivated. Even if Chevron and ConocoPhillips reverse course in the second half of the year, the production response would lag well into 2027.2
ConocoPhillips' year-on-year production decline, already visible in first-half 2026 data, is the earliest concrete signal of what restrained capital budgets mean at the wellhead — and how far that trend extends will shape U.S. supply through the end of the year.1,2