FILE PHOTO: A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture. REUTERS/Dado Ruvic
NEW YORK: Exxon Mobil Corp and Chevron Corp capped Big Oil earnings season by revealing blockbuster increases in fossil fuel production – just as the Organisation of the Petroleum Exporting Countries (Opec) and its allies are preparing to increase the supply of crude into the global market.
The US oil majors’ increases were fuelled by pumping record amounts of crude from the Permian Basin, which continues to surprise analysts with year-on-year growth and efficiency gains.
Exxon’s oil and gas production, boosted by the US$60bil acquisition of Pioneer Natural Resources Co, rose 24% from a year earlier while Chevron grew output by 7%.
The US companies weren’t alone. Shell Plc and BP Plc hiked production 4% and 2% respectively, even despite net-zero targets that are more aggressive than their American rivals.
It all combines to a weakening outlook for oil prices, which have already dropped roughly 12% in the past six months due to lacklustre demand from China, the world’s biggest importer of crude.
They may drop even further if Opec follows through with its plan to bring back previously curtailed production.
The moment also stands in stark contrast to just a few years ago, when executives were working to rein in capital spending during the pandemic and as they faced pressure from the environmental, social and governance movement to invest in low-carbon alternatives to fossil fuels.
Success in the former and failure at the latter has led the industry to coalesce around a common strategy: oil and gas that’s cheap enough to withstand any energy transition scenario.
“Exxon and Chevron are sticking to their core oil and gas strategy while getting bigger in some of the best assets globally,” said Nick Hummel, a St Louis-based analyst at Edward D Jones & Co.
“The near-term outlook for oil and gas feels soft, especially with Opec poised to move more barrels onto the market.” Exxon is the prime example of the change in strategy. — Bloomberg
