Executives from major oil companies expressed limited optimism this week about the short-term prospects for refining profits, following disappointing fourth-quarter earnings reports from Chevron (CVX.N), Exxon Mobil (XOM.N), and Shell (SHEL.L). All three companies faced a sharp decline in profits due to a slump in refining margins.
The growth in global refining capacity expected in 2024, paired with sluggish demand, has negatively impacted these margins.
Chevron’s stock dropped by 4% after the company reported its first loss in the refining sector since 2020, resulting in the second-largest oil producer in the U.S. falling short of Wall Street’s profit expectations.
Chevron’s CEO Mike Wirth stated in an interview, “The trend of margins weakening throughout 2024 is something that is likely to persist and extend into 2025.”
He acknowledged, “It was a tough fourth quarter, there’s no question about it,” during a post-earnings conference call, responding to an analyst’s inquiry about the downturn in refining.
Wirth added, “I wouldn’t call it a perfect storm, but it was a quarter where everything seemed to go in the wrong direction, and it was all negative.”
Wirth mentioned that Chevron would concentrate on factors within its control to recover, including scheduling less maintenance for its refineries in the upcoming year.
Exxon Mobil’s stock dropped by 2.5% following a 75% decline in adjusted refining earnings compared to the third quarter. Meanwhile, the broader S&P 500 Energy Sector index fell by 2.8% on Friday.
Exxon’s Chief Financial Officer, Kathryn Mikells, stated in an interview that the refining sector continues to face challenges due to an increase in fuel supply, as new refineries have been opened in various countries around the world.
“That’s the key factor we’re monitoring as we look toward 2025,” Mikells noted.
Despite this, the top U.S. oil producer exceeded profit forecasts, driven by increased production from the Permian Basin, the leading oilfield in the U.S., and Guyana, a rising oil hotspot.
Shell, based in the UK, announced on Thursday that while it has no intention of exiting the refining sector, it also does not plan to expand it.
The company’s fourth-quarter earnings dropped nearly 50% compared to the previous year, falling to $3.66 billion, primarily due to weaker refining margins.
Last year, Shell sold its refining and chemicals hub in Singapore and announced plans to close another plant in Wesseling, Germany.
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