Power Up: How long will oil profits sizzle?
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Aug 5 -By Liz Hampton
U.S. Energy Markets Editor
Hello Power Up readers!We're starting to come up for air from earnings season, which has been mostly positive for major oil companies. Higher prices and increases inoutput have helped support results, despite weaker refining margins. But the recent sell-off in oil prices could spell trouble for the current quarter, as markets face jitters over a possible recession. Let’s dive in!
Higher oil prices, weaker fuel margins
Recent sell-off could hurt earnings
Oil and gas company earnings have been rolling out at a breakneck pace, with oil majors Exxon Mobil and Chevron both reporting at the end of last week.
Oil companies skated through the second quarter enjoying relatively high oil prices. That could change for the current quarter. As of this morning, oil prices are at their lowest level since January on fears of a recession. Brent is trading around $76.05 a barrel, while U.S. West Texas Intermediate futures are around $72.75 a barrel.
U.S. oil major Exxon Mobil saw a $9.2 billion second-quarter profit and raised its oil output target. The company got a lift from its acquisition of Pioneer Natural Resources, while its profits from pumping oil and gas were up some 25% from a year ago to $7.1 billion.
Results mirrored profit beats by rivals including ConocoPhillips and Shell.
Exxon's earnings from gasoline and diesel were off 32% to $946 million. Other companies, including BP, have also seen weaker refining results. The British major still topped analysts' expectations, as stronger oil prices and retail earnings offset the impact from its refining business.
Chevron last week missed analysts forecast by 38 cents, with earnings off 19% to $2.55 per share. CEO Mike Wirth blamed some operational issues, as well as other discrete items.
The company also discounted the possibility of closing its $53 billion acquisition of Hess Corp until before mid-2025, news that sent its shares down 3%. Its shares suffered the biggest drop in 20 months on Thursday amid revelations of new delaysin the proposed deal, Gary McWilliams reported.
In other corners of the energy universe, LyondellBasell on Friday topped Wall Street estimatesand said it was benefiting from cheap natural gas prices, which have fallen some 21.7% this year.
Those softer natural gas prices - the U.S. Henry Hub benchmark is trading under $2 per million British Thermal Unit - aren't good for everyone.
Shale producer Coterra Energy missed analysts estimates last week, due to those softer gas prices. Its natural gas production declined during the quarter.
ESSENTIAL READING
OPEC's oil output rose in July, according to a Reuters survey, after a rebound in supplies from Saudi Arabia and small increases by other members help offset the impact of ongoing voluntary supply cuts. The group pumped 26.7 million barrels per day, up from 100,000 bpd in June.
Carl Icahn-backed CVR and a group of creditors are competing in the last mile of a U.S. court auction for Citgo Petroleum, Reuters exclusively reported. CVR submitted an all-cash bid of roughly $8 billion, while an investment group offered roughly $9 billion in combined cash and claims against Venezuela.
U.S. oil and gas drillers cut rigs for the first time in three weeks, Baker Hughes said on Friday. The rig count is now at 586, down 73, or 11%, from year-ago levels.
LNG company Venture Global has suedconstruction contractor Kiewet, alleging it passed on confidential documents to Shell. Venture Global's Calcasieu Pass plant has been at the center of a dispute with consumers - including Shell and BP - around delays to its start.
The Palisades nuclear reactor in Michigan - the first U.S. nuclear plant to try reopening after undergoing preparations for a permanent closure – is not fit to restart anytime soon, a former official said, because it sidestepped safety work before retirement. Power company Entergy closed the plant in 2022.
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Editing by Marguerita Choy
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