Bernstein told investors in a note on Thursday that a long-term oil price assumption of US$75 per barrel is reasonable for equity valuation, drawing on findings from a fresh survey of the 50 largest listed oil and gas companies globally.
The firm’s analyst Neil Beveridge estimated that the global oil marginal cost declined by 2% in 2025 to US$69 per barrel. That drop was driven mainly by a 14% fall in production costs, according to the note.
Bernstein expects marginal cost to move higher in 2026, forecasting it will reach US$77 per barrel as stronger spot prices and a tighter physical market push cost inflation through the supply chain.
The firm framed its US$75 target as consistent with its view that US$75/bbl is a reasonable long-term oil price assumption for equity valuation, noting that this sits above the current 60-month forward strip of US$70/bbl.
Other metrics from the survey outline the industry's short-term breakevens and cost structure:
- Industry net income breakeven was reported at US$50 per barrel.
- Global unit production costs fell 5% to US$35 per barrel of oil equivalent.
Returns and reinvestment trends also featured prominently. The survey showed industry returns on average capital employed fell to 10% last year, which Bernstein noted is in line with the long-term average and the cost of capital.
On reinvestment, the note highlighted a structural issue. The industry’s reinvestment ratio was 61% in 2025. While that represents a recovery from a trough of 36% in 2022, it remains well below the historical 80% to 90% range. Bernstein said this lower reinvestment level reflects a more cautious outlook on long-term demand.
Reserves metrics in the survey pointed to further shifts. Reported reserves life hit a 20-year low of 10.4 years, compared with a long-term average of 13 years. Bernstein noted that this shorter reserves life could represent a bullish signal for prices over time.
The note ties these various elements together in support of its US$75 long-term price view: marginal cost dynamics, breakeven and unit cost data, returns on capital, subdued reinvestment and declining reserves life. Collectively, Bernstein presents these metrics as the basis for its valuation assumption, which sits modestly above the five-year forward strip.
While the survey captures a snapshot of industry economics and strategy among the largest listed oil and gas companies, the firm’s assessment emphasizes both the near-term cost pressures expected in 2026 and longer-term structural considerations that underlie its valuation stance.