Exxon and Chevron reported modest profits as oil prices fell

ExxonMobil and Chevron, the two largest US oil companies, reported relatively modest earnings growth on Friday as they were forced to run their businesses in the face of lower oil and natural gas prices.

The slowdown, but still strong, after record earnings in 2022 came on the heels of Russia’s invasion of Ukraine, which drove up fossil fuel prices for most of the year. By the end of 2022, lower fuel demand in Europe and Asia has helped lower prices. Refineries continued to perform well, which helped Exxon and Chevron boost their revenues.

Exxon reported profits in the first quarter of $11.4 billion, compared to $5.95 billion for the same period last year. But the results represented a decrease from the $12.8 billion achieved in the fourth quarter of 2022.

Chevron fared slightly better, reporting profits of about $6.6 billion in the first quarter, an improvement over the $6.3 billion it made in the first quarter of 2022 and the $6.4 billion in the fourth quarter of 2022.

Exxon CEO Darren Woods expressed confidence in the future, though he said the global outlook for energy markets would depend heavily on China’s economic recovery.

“Gasoline demand seems very reasonable,” Woods said. “Demand for aircraft and transportation seems to be trending upwards. The outlook looks very healthy.”

Demand for gasoline, diesel and other fuels has increased as the global economy emerges from the pandemic slowdown in 2020 and 2021. But despite higher crude and fuel prices for most of the past year, both companies have been cautious about increasing investment to boost production.

Although both companies have increased production over the past two years in the Permian Basin, which straddles Texas and New Mexico, Chevron’s recent production has fallen short of previous expectations. Both have focused more on returning cash to shareholders through increased dividends and share buybacks.

“While commodity markets remain uncertain, our approach remains unchanged,” said Mike Wirth, Chevron CEO. “Applying discipline of capital and cost to asset advantages in both the traditional and new energy business means a steady return of cash for shareholders.”

Exxon continues to increase production in the deep waters off the coast of Guyana, and this week announced that it will proceed with a fifth project there that it expects to produce 250,000 barrels of oil per day starting in 2026.

Exxon, Chevron and other oil companies have appeared since 2022 with record profits, after the Russian invasion of Ukraine last February led to a rise in crude oil and natural gas prices. But fossil fuel prices have gradually eased since then, despite declines in US oil inventories, because investors are increasingly convinced that the global economy and energy demand are slowing.

In recent days, the price of oil has fallen below $80 a barrel, after a jump to more than $120 a barrel last June. Prices stabilized slightly after the Organization of the Petroleum Exporting Countries (OPEC) agreed with Russia and its allies early this month to cut crude production by 1.2 million barrels per day until the end of the year. Actual cuts were about half that amount, a drop of less than 1 percent in global supplies.

Supplies remain strong. Russian oil and gas exports did not decrease as much as experts expected after European countries started buying less of it. This is because China, India and other developing countries buy more Russian oil and gas.

Global LNG prices have fallen by 45 percent since the beginning of the year. In the United States, regular gasoline prices have fallen about 12 percent and diesel prices by 14 percent over the past 12 months, according to the AAA auto club. Global demand for oil and LNG is still increasing, but slowly.

The decline in fossil fuel prices is partly due to the unusually warm weather in the Northern Hemisphere and especially Europe last winter, which reduced demand for natural gas and heating oil. But fears that the global economic slowdown will reduce manufacturing activity have convinced many traders that prices will continue to fall.

There are other reasons for the weak demand for gasoline in the coming years. This week, the International Energy Agency projected that one in five new cars sold this year will be electric, up from 2% four years ago. The organization said sales of battery-powered cars would accelerate over the decade in China, the United States and Europe.

Mr Wirth said that while demand for diesel has fallen, demand for jet fuel has increased. “Gasoline demand has basically returned to pre-pandemic levels globally,” he said. “In Asia, we see demand returning as China continues to open up and increase mobility.”