- Shell and Exxon warned of weaker Q2 earnings due to lower oil and gas prices, with Exxon expecting a $1.5 billion hit.
- Despite bearish forecasts, OPEC+ raised output and prices rose, suggesting demand remains stronger than expected—challenging the EV-driven demand collapse narrative.
- Analysts view the dip as cyclical, not structural—Big Oil is seen as resilient, having prepared for downturns since COVID and unlikely to face a lasting crisis.
Earlier this week, Shell warned its second-quarter earnings would be weaker due to lower trade in gas and oil derivatives. Now, Exxon (NYSE:) has joined its peer in the warning series, saying weaker and gas prices during the second quarter would affect its financial results, and rather substantially, at that. Big Oil is having a difficult moment. The question is whether it would extend in time.
Back in May, Morgan Stanley predicted that the biggest international oil companies were set to see a slump in earnings later this year and in 2026, threatening the pace of buybacks, as a substantial oil market surplus would weigh on prices.
The investment bank was by far not the only one predicting that global oil markets would be panting under the weight of all that oil that there is no demand for—almost everyone was predicting it. Yet something interesting happened this week that may make some forecasters reconsider. OPEC+ said it would boost production by over 500,000 bpd next month. Oil prices rose.
Now, Exxon has warned that it would suffer a financial blow of $1.5 billion from weaker second-quarter prices. Most of the impact would come from the oil prices slum during the reporting period, Bloomberg reported Monday, citing the company. Some $500 million will be the share of prices. Yet the latest on oil markets suggests this is not turning into a chronic condition.
“The supply picture definitely looks to be elevating, however, the stronger demand is remaining above expectations as well,” BOK Financial senior vice president of trading, Dennis Kissler, told Reuters this week.
The reason demand is above expectations is because virtually all forecasters assumed demand for oil was on a downward spiral because of EVs in China and Norway, and it was only a matter of time before the spiral reached its natural end.
Instead, oil demand—as reported by the Energy Institute in its latest Statistical Review of World Energy earlier this year—has remained impressively resilient. Not only this, but grim expectations for global economic gloom and doom amid Donald Trump’s unusual approach to trade policy have begun to subside as deals get signed and the U.S. president thinks twice about punitive tariffs. The world economy, it seems, will survive, after all.
All these recent developments suggest Big Oil’s second-quarter financial troubles are a temporary trip on weak prices, which tends to happen on a rather regular basis given the cyclical nature of commodity markets. The record profits of 2022 may not return anytime soon—or ever—but those were an outlier, however much some analysts like to present them as business as usual. So was the Covid pandemic just two short years earlier, and it taught Big Oil a valuable lesson.
“Our organisation has planned for this. We pressure-test our plans and the financial outcomes with scenarios that are more severe than our Covid experience,” Exxon’s Darren Woods said earlier this year, saying the company had prepared for a downturn, cutting almost $13 billion in costs over five years.
It’s not the only one, although Wood claimed that no other company had come close to its cost-cutting achievement. All Big Oil companies remember the pandemic, the demand drop from the lockdowns, and the resulting financial disaster. Yet it survived that and went on to make up for it two years later, when Russian troops entered Eastern Ukraine and everyone thought World War III was around the corner. So, chances are these warnings from Exxon and Shell (NYSE:), and probably others, are business as usual. Some quarters are good, some not so much. Big Oil, and not just Big Oil, adapts and survives—for as long as there is demand for oil and gas.`