A method for oil recovery whereby an exothermic water reactant (EWR) encapsulated in a water soluble coating is placed in water and pumped into one or more oil wells in contact with an oil bearing formation. After the water carries the EWR to the bottom of the injection well, the water soluble coating dissolves and the EWR reacts with the water to produce heat, an alkali solution, and hydrogen. The heat from the EWR reaction generates steam, which is forced into the oil bearing formation where it condenses and transfers heat to the oil, elevating its temperature and decreasing the viscosity of the oil. The aqueous alkali solution mixes with the oil in the oil bearing formation and forms a surfactant that reduces the interfacial tension between the oil and water. The hydrogen may be used to react with the oil at these elevated temperatures to form lighter molecules, thus upgrading to a certain extent the oil in situ. As a result, the oil can flow more efficiently and easily through the oil bearing formation towards and into one or more production wells.