Oil prices have been on a rollercoaster ride recently, dipping, recovering, and then falling again. A fragile cease-fire in Gaza and fresh U.S. sanctions on Russian energy have contributed to these swings. As October drew to a close, the oil market found itself back where it started, with prices hovering around $60 a barrel, and experts bracing for potential further declines.
The global market is awash with oil, and unfortunately, demand isn’t keeping pace. This oversupply, coupled with uncertainties surrounding global trade and the stability of the U.S. economy, paints a complex and somewhat cloudy picture for the future.
Interestingly, instead of scaling back, America’s biggest oil players are actually ramping up production. Exxon Mobil, for instance, saw its output rise by about 4 percent in the third quarter compared to the previous year. Chevron also boosted its production by approximately 7 percent, and that’s not even counting the contributions from Hess, a company it acquired earlier this summer.
Eimear Bonner, Chevron’s chief financial officer, confidently stated, “Our cash flows from our assets are very resilient even in lower prices.” She believes these market cycles are typically short-lived.
Exxon and Chevron aren’t alone in this strategy. The influential oil cartel, OPEC Plus, is also increasing its output. A key meeting is scheduled for Sunday, where Saudi Arabia and other OPEC Plus members will discuss potentially injecting even more oil into the market. UBS estimates that global supplies will surge by about 2.1 percent this year, while demand is only expected to grow by a modest 0.9 percent.
This unwavering commitment to drilling, even amidst falling prices, highlights a crucial point: oil extraction remains highly profitable for many companies. Furthermore, many industry leaders are optimistic that demand will rebound relatively quickly, possibly as soon as next year.
Olivier Le Peuch, CEO of the oilfield services giant SLB, echoed this sentiment, noting, “We’re not talking years, we’re talking months.”
However, the current climate has impacted profits. Exxon’s third-quarter profit dropped by 12 percent to $7.5 billion, and revenue decreased by 5 percent to $85.3 billion. This was primarily due to oil prices being roughly $10 a barrel lower than in the third quarter of 2024. Thankfully, significantly higher natural gas prices during this recent quarter helped cushion the blow.
Chevron also experienced a profit decline, falling 21 percent to $3.5 billion, with revenue decreasing nearly 2 percent to $49.7 billion.
Wael Sawan, CEO of Shell, acknowledged the challenges, stating, “In the short to medium term, there are headwinds. Longer term, we continue to have strong conviction in crude prices.” Shell, a British company, reported a 24 percent increase in third-quarter profit to $5.3 billion, largely driven by its trading operations, though its profit was lower than in 2024 once one-time adjustments were made.
In premarket trading, Exxon’s stock price saw a dip of over 1 percent, while Chevron’s slightly increased. Overall, the oil industry has lagged behind the broader stock market this year, with a U.S. oil and gas exchange-traded fund down 5 percent, in stark contrast to the S&P 500 index’s 16 percent gain.
To maintain their profit margins, both Exxon and Chevron, like many other companies in the sector, are resorting to workforce reductions.
Adding to the industry’s woes, not only are oil prices lower, but President Trump’s tariffs have increased the cost of essential drilling materials like steel pipe.
This dual challenge of depressed oil prices and rising costs has particularly hit smaller oil and gas producers hard. Many have idled drilling rigs and postponed fracking operations, the technique used to create fractures in rock formations to extract trapped oil and gas.
According to ProPetro Holding, a service company, the number of hydraulic fracturing crews operating in the Permian Basin, America’s leading oil field, has decreased by approximately 25 percent this year.