5 months ago • 2 mins
What’s going on here?
ExxonMobil’s profit trundled downhill last quarter, according to its update on Friday.
What does this mean?
Energy prices haven’t been close to last year’s war-induced highs, so record-breaking profits were never on the cards this time. After all, the average price of Brent crude oil, a key international benchmark, was around $80 a barrel last quarter – a far cry from $110 over the same period last year.
So it didn’t exactly set analysts’ hearts aflutter when Exxon’s profit slid to $7.9 billion last quarter, less than half of last year’s $17.9 billion record high. But besides 2022, that was still Exxon’s strongest result for the period in over ten years. The playbook: cutting costs, auctioning off assets, and ramping up production in the Permian basin.
Why should I care?
For markets: Like oil and water.
Exxon isn’t alone in this oil slick. Rivals Chevron, Shell, and TotalEnergies reported similar slumps, and analysts are bracing for more of the same from BP next week. The sector’s current rut, coupled with concerns over its environmental effects, has lost investors’ favor – and the energy sector’s price-to-earnings ratio, a key valuation metric, is the lowest in the whole S&P 500. But there’s a twist: it’s also the sector making the most cash in the index. And Warren Buffett, whose Berkshire Hathaway has been upping its fossil fuel bets lately, may think there’s a bargain to be had.
The bigger picture: A long goodbye.
Despite the push for a greener world, the globe is guzzling more oil than ever. Data shows oil demand likely hit a fresh record high of over 102 million barrels a day in July. And current trends suggest global demand will actually tick up over the next five years. So while oil companies might be black sheep right now, the world’s not done with their wool just yet.
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