The past few weeks have been a rollercoaster for oil prices, experiencing ups and downs driven by significant global events. These included a tentative cease-fire in Gaza and fresh sanctions from the U.S. targeting Russian energy.
However, as October drew to a close, the market found itself largely back where it started. Oil prices were hovering around $60 per barrel, and companies were preparing for potential further declines.
A key issue is the sheer abundance of oil worldwide, far exceeding current demand. This oversupply, coupled with uncertainties in global trade and the stability of the U.S. economy, creates a complex and unpredictable market environment.
Despite these challenges, America’s biggest oil companies are doing the opposite of what one might expect: they’re actually increasing production. Exxon Mobil saw its output rise by about 4% in the third quarter compared to the previous year. Chevron also boosted its production by roughly 7%, a figure that doesn’t even include the additional contributions from Hess, a company it acquired this summer.
Eimear Bonner, Chevron’s chief financial officer, explained in an interview that the company’s assets generate robust cash flow even when prices are low. She also noted that such market downturns are usually short-lived.
Exxon and Chevron aren’t alone in this strategy; the OPEC Plus oil cartel is also increasing its output. A meeting of Saudi Arabia and other OPEC Plus members is scheduled for Sunday to discuss potentially adding even more oil to the market. Overall, global oil supplies are projected to grow by about 2.1% this year, while demand is expected to increase by only 0.9%, according to estimates from UBS.
The industry’s continued drilling, even with falling prices, highlights a key point: extracting oil remains profitable for many companies. Furthermore, many industry leaders believe that demand will soon rebound, possibly as early as next year.
Olivier Le Peuch, CEO of the oilfield service giant SLB, recently stated, “We’re not talking years, we’re talking months,” indicating an expectation of a swift market recovery.
During this period, Exxon’s third-quarter profit dropped by 12% to $7.5 billion. Revenue also decreased by 5% to $85.3 billion, largely due to oil prices being approximately $10 per barrel lower than in the third quarter of 2024. However, significantly higher natural gas prices in the current quarter partially compensated for these losses.
Chevron reported a 21% decrease in profit, totaling $3.5 billion, with revenue experiencing a slight dip of almost 2% to $49.7 billion.
Wael Sawan, CEO of Shell, acknowledged “headwinds” in the short to medium term but expressed strong confidence in long-term crude prices. This statement came after the British company announced its third-quarter financial results, which showed a 24% profit increase to $5.3 billion, thanks to its trading operations. However, this figure was lower than the previous year’s adjusted for one-time gains.
In premarket trading, Exxon’s stock price dropped over 1%, while Chevron’s saw a slight rise. The oil and gas sector has significantly lagged the broader stock market this year; an exchange-traded fund tracking U.S. oil and gas companies recorded a 5% decline, contrasting sharply with the S&P 500 index’s 16% gain.
To protect their profit margins, Exxon and Chevron, much like other companies in the sector, are implementing workforce reductions.
Compounding the issue of lower oil prices, President Trump’s tariffs have led to increased costs for essential drilling materials, such as steel pipes, further squeezing the industry.
This dual challenge of reduced oil prices and elevated costs has been particularly detrimental to smaller oil and gas companies. Many have responded by removing drilling rigs from operation and postponing hydraulic fracturing, or “fracking”—the technique used to extract oil and gas from rock formations.
In the Permian Basin, the United States’ leading oil field, the number of active hydraulic fracturing crews has decreased by approximately 25% this year, as reported by ProPetro Holding.