Key insights
- Bernstein forecasts a long-term oil price of $75/barrel, citing rising marginal costs and declining reserves among oil and gas companies. While global oil marginal cost fell in 2025, it's expected to climb in 2026 due to cost inflation. Low reinvestment ratios and declining reserve life could be bullish for oil prices, potentially benefiting energy sector equities.
Investing.com -- Bernstein told investors in a note on Thursday that it sees $75 per barrel as a reasonable long-term oil price assumption for equity valuation, citing a new survey of the 50 largest listed oil and gas companies globally that points to rising marginal costs and a declining reserves outlook.
Analyst Neil Beveridge estimated that the global oil marginal cost fell 2% in 2025 to $69 per barrel, driven largely by a 14% drop in production costs.
However, Bernstein expects that figure to climb to $77 per barrel in 2026 as higher spot prices and a tighter physical market push cost inflation through the supply chain.
The firm said the $75 target is "consistent with our US$75/bbl as a reasonable long-term oil price assumption for equity valuation, above the current 60-month forward strip of US$70/bbl."
The survey also found that the industry's net income breakeven stands at $50 per barrel, with global unit production costs declining 5% to $35 per barrel of oil equivalent.
Industry returns on average capital employed fell to 10% last year, in line with the long-term average and cost of capital.
On reinvestment, Bernstein flagged a structural concern. The industry reinvestment ratio stood at 61% in 2025, and while that marks a recovery from a trough of 36% in 2022, it remains well below the historical 80% to 90% range, "reflecting a more cautious outlook on long-term demand," the firm said.
Reserves life hit a 20-year low of 10.4 years, against a long-term average of 13 years, which Bernstein said could represent a bullish signal for prices over time.