Leading oil and gas companies report second quarter results over the next two weeks. Profits are forecast to be significantly lower than the record gains that followed Russia’s 2022 invasion of Ukraine, when oil and gas prices shot up, but are still set to be well above pre-pandemic levels.
Several of the majors, including Exxon Mobil, Shell and BP warned in trading updates ahead of the mid-year results that earnings would be hit by weaker refining margins, reflecting reduced demand for fuels, in particular diesel, in the United States, China and other markets.
Diesel, used in trucks, plants and machinery, is one of the best gauges for industrial and agricultural activity. The lower downstream earnings, however, will probably be offset by continued strength in oil prices, supported by supply cuts from the OPEC+ group of producing nations, as well as strong liquefied natural gas prices in the quarter due to unplanned outages.
Another trend that has emerged is the weakness of the biofuels market. Both BP and Shell suspended biofuel plants under development and took hefty impairments due to thinning margins as a result of high feedstock costs and the rolling back of government mandates. Chevron earlier this year also mothballed two U.S. Midwest biodiesel facilities.
Investors expect the companies to maintain the high rate of share repurchases that grew steadily in recent quarters. One to watch is whether Exxon will increase its buybacks after completing its $60 billion acquisition of Pioneer Natural Resources in May.
France’s TotalEnergies reports its results on July 25, BP on July 30, Shell on Aug 1 while Exxon Mobil and Chevron both report on Aug 2.
