As summer demand peaks, oil markets are expected to face a significant surplus in the second half of 2025 and into 2026 as OPEC+ unwinds production cuts, BofA Securities said in a note Wednesday.

This is most evident in the short-cycle US land market, where horizontal rig counts have fallen 10% from their February high, reflecting a 14% drop in oil activity even as gas activity has risen 15%. Internationally, activity has also softened, particularly in Saudi Arabia, but remains more resilient compared to the US.

In earlier forecasts, US horizontal rig counts were projected to fall to about 475 if West Texas Intermediate prices stabilized near $60 per barrel, and with counts now at 480 and WTI holding around that level, the rig count is expected to bottom out near 455 to 460 by year-end, according to the note.

While the prospect of a trough within six months is positive, there is still considerable pricing risk in the second half of 2025 and into 2026. US drilling and completions capital expenditure is forecast to decline 13% this year and 4% in 2026, while international spending is projected to fall 5% in 2025 and 2% in 2026.

Despite the challenging outlook, Baker Hughes (BKR) and TechnipFMC (FTI) remain fundamentally the best-positioned companies in oilfield services, supported by a mix of technology, differentiated business models, and strong backlog-driven resilience, BofA said.

The firm raised its price objective on TechnipFMC to $40 from $36, reflecting a lower assumed terminal decline rate of 2% beyond 2030 due to a robust deepwater project pipeline.

Price: 39.25, Change: -0.87, Percent Change: -2.16