Exxon Mobil and Chevron are finding the oil-price recovery a slippery ride. The US oil majors, between them valued at more than $550 billion, posted messy second-quarter results on Friday despite a 30 per cent jump in the price of the black stuff during the period. Looking through the noise, falling supply should help establish a slow recovery into 2017.
The price of a barrel of Brent crude hit $50 at the end of June, up sharply from the January low of around $27 per barrel. Even so, average prices were lower during the second quarter than they were during the equivalent period of 2015, when the global oil benchmark traded in a range of $50-$70 per barrel.
That made comparisons tough, and Exxon and Chevron also both made less money turning oil into gasoline as refining margins fell across the industry. Combined, that fueled a 59 per cent drop in Exxon's net income compared with a year earlier, with unexpected supply disruptions contributing to profit that fell well short of what analysts had expected. Chevron swung to a $1.5 billion loss as $2.8 billion of asset writedowns and other charges piled on top of a drop in earnings across the business.
Crude prices have slipped from their 2016 highs in recent weeks, but should firm up heading into 2017 as billions of dollars of cuts in investment across the industry feed through into reduced output. Strong balance sheets and massive scale mean Exxon and Chevron can safely navigate stormy seas. Their mixed second-quarter showings, though, serve as a reminder that even when conditions are improving, turning a supertanker isn't easy.
The price of a barrel of Brent crude hit $50 at the end of June, up sharply from the January low of around $27 per barrel. Even so, average prices were lower during the second quarter than they were during the equivalent period of 2015, when the global oil benchmark traded in a range of $50-$70 per barrel.
That made comparisons tough, and Exxon and Chevron also both made less money turning oil into gasoline as refining margins fell across the industry. Combined, that fueled a 59 per cent drop in Exxon's net income compared with a year earlier, with unexpected supply disruptions contributing to profit that fell well short of what analysts had expected. Chevron swung to a $1.5 billion loss as $2.8 billion of asset writedowns and other charges piled on top of a drop in earnings across the business.
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There are reasons for optimism. Both energy giants' upstream oil and gas segments earned more in the second quarter than they did in the first, thanks to rising prices and falling costs. Exxon also recently returned to the acquisition trail with a $2.5 billion deal to acquire Papa New Guinea-focused gas explorer InterOil - a sign that chief executive Rex Tillerson is looking ahead to secure new sources of production growth. A very modest drop in Exxon's stock price and very little change to Chevron's suggest investors are looking forward rather than back, too.
Crude prices have slipped from their 2016 highs in recent weeks, but should firm up heading into 2017 as billions of dollars of cuts in investment across the industry feed through into reduced output. Strong balance sheets and massive scale mean Exxon and Chevron can safely navigate stormy seas. Their mixed second-quarter showings, though, serve as a reminder that even when conditions are improving, turning a supertanker isn't easy.