The profit of the world's nine largest oil companies in the first quarter of the year fell by 18.5% to $66 billion compared to the same period last year.
These nine companies comprise US-based ExxonMobil and Chevron, Dutch Royal Dutch Shell, British bp, French TotalEnergies, Italian Eni, Russian Rosneft, Norwegian Equinor, and Saudi Arabia's national oil company, Saudi Aramco.
Saudi Aramco reported 14.4% less earnings in the first quarter relative to the first quarter last year, decreasing to $27.3 billion; ExxonMobil saw a 28.1% fall in profit to $8.2 billion; Royal Dutch Shell lost 19.8% in profit to $7.7 billion; bp reported a 46% profit decline to $2.7 billion; Chevron’s profit contracted by 16.7% to $5.5 billion; Equinor saw a 46.9% decrease in profits to $2.6 billion; and Eni’s profit plummeted by 48% to $1.3 billion.
During this period, Russia's largest oil company, Rosneft, increased its profits the most. The company's revenue reached $5.4 billion in the first quarter of this year, up 35% from last year.
The French energy company TotalEnergies, which announced an income of $5.6 billion in the first three months of last year, increased its profit rate by 1.8% to $5.7 billion in this year’s first quarter.
- International oil companies are better able to adapt to market conditions
Fereydoun Barkeshli, the president of the Vienna Energy Research Group, said that “to assess the company’s earnings and profitability margins, one has to look at the performance of international oil companies from a broader perspective.”
Barkeshli spoke on the necessity of distinguishing between the profit margins of international and national oil companies, given that international oil prices were below $70 per barrel in early 2023 and moved up to around $80 per barrel by the first quarter of this year, indicating a $5 higher oil price in every quarter since the first quarter of 2023.
He added that, from a broader perspective, some other commodities, such as copper, zinc, aluminum, or coffee, have risen faster than oil.
Barkeshli took into account the price of refining various crude grades as well. He claimed that there was a relative equilibrium between the light and heavy crude oil classes prior to the shale oil revolution. But as more shale oil flooded the market, the US had to export this oil grade to refineries that are equipped to handle it, the infrastructure for which the US lacks.
Because of this lack of refining capability, Middle East crude oil was in high demand, a grade that the US and many terminals are capable of refining. And due to these changing refining dynamics, refineries began to play a more important role in global oil markets.
Consequently, Barkeshli stressed that the high gas prices that many Americans pay at gas stations are directly caused by the refineries' larger profit margins rather than the rising price of crude oil. He added that the profitability rates of businesses that adjust to market dynamics and are involved in the entire supply chain continue to be stable.
Meanwhile, he argued that uncertainties as to the timing of the US Federal Reserve's (Fed) rate cut and US President Joe Biden’s mission to raise domestic production and lower gasoline prices also impacted first-quarter profits.
On the other hand, Barkeshli said that all Middle Eastern oil giants recorded high profit margins due to their financial structures and hidden subsidies included in their profit calculations.
-Three main reasons for Rosneft’s better-than-expected performance
Barkeshli stated that the first of the three main reasons for Rosneft's better-than-expected performance were the relatively higher oil prices in the last quarter of last year and the first quarter of this year.
Citing higher sales and export volumes as the second reason, Barkeshli emphasized that most international tanker monitoring companies have reported a larger number of tankers carrying the company's crude oil.
According to Barkeshli, the last factor is the company's roadmap to reduce costs and increase efficiency.
'This process had been worked out back in 2021–2024. In fact, this was the general oil production policy of Russia during the last couple of years. On the other hand, when we talk about relatively higher international oil prices, it is also referred to as less discounts on every barrel,” he concluded.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr