OPEC was correct; low demand has nullified any benefits from the oil price drop.
With Brent crude falling below $78/bbl (£62) this week, the group's position that the cutbacks were required to avert an overstock seems prophetic. Saudi Arabia and its allies shocked global oil markets at the beginning of the month when they announced output cuts.
Ed Morse, head of commodities research at Citi, provided insight. He said that those who predicted oil prices of $100 (£80) or more were blind to the state of the markets.
In April, crude swung abruptly, rising to a 15-month high after the cutbacks were announced, but has since given up all of its gains as oil markets have slowly worsened, burdened by China's slower-than-anticipated recovery from the epidemic and persistent worries of a recession in the United States.
Opec+ May Propose Further Cutbacks at Its June Output Review Meeting
At its June meeting to review production, OPEC+ may soon decide whether or not to argue for additional cuts.
On Friday, crude oil futures suddenly rose and ended the month marginally higher, ending a five-month losing trend.
Boosting oil prices, the Energy Information Administration released its monthly report on Friday, which showed that petroleum consumption in the United States had reached its peak level from Nov 2022, while output had hit its lowest from Dec 2022.
On Friday, oil majors Exxon Mobil and Chevron announced solid quarterly results, propelling the Energy (NYSEARCA:XLE) sector to the top of the S&P sector leaderboard.
Chevron (CVX) also increased after reporting record first-quarter profits of $6.6 billion, while Exxon (NYSE:XOM) hit a new intraday high of $119.92.
According to projections from Wall Street analysts surveyed by Visible Alpha, Exxon's (XOM) cash balance would rise to about $40 billion by the end of the year, up from $32.7 billion in the previous quarter. Additionally, the business earned $11.4 billion in free cash flow, the most among major oil majors.
- Guide: Best Futures Trading
Meanwhile, Exxon is Running Out of Excuses to Make an Acquisition
As Wall Street Journal Heard On The Street columnist Jinjoo Lee put it:
He said that Exxon is running out of excuses to make an acquisition now that it has so much cash on hand.
The Energy Select ETF (XLE) finished the week up 0.2% thanks to the solid leadership of the fund's top managers.
LITM (+23.6%), FLUX (+15%), CHNR (+26.1%), ATLX (+26.9%), and EU (+14.4%) are the five best-performing natural and energy resource stocks during the previous five trading days.
The five worst-performing energy and natural resource stocks during the last week are as follows: Drops of 29% were seen in (OTC:NESR), 18% in (SJT), 12.5% in (HPK), 12.4% in (EC), and 12.1% in (MTR).
Quarterly Profit at ExxonMobil Hits All-Time High
As higher output more than made up for lower oil prices, Exxon's first quarter profit was its highest ever.
Lower crude oil and natural gas realisations hurt Exxon Mobil's (NYSE:XOM) performance in the first quarter, but the company still posted adjusted profits that were a record and above Wall Street projections. Revenues were down 4% year over year.
The absence of positive mark-to-market effects on non-settled derivatives, less natural gas and liquidity, and more scheduled maintenance reduced first-quarter to $11.43 b net income, or $2.79 per share, from $5.48 b, or $1.28 per share, in the year-ago quarter.
With Permian Basin's 40% increase coming and Exxon starting up a second (Guyanese) production platform in 2022, gas and oil net output was 3.83M boe/day. This is a rise of 4.2% year over year and relatively flat level compared to the last quarter of 2022.
Takeaway
The oil price decline of 16% from a year earlier was largely mitigated by the higher production levels.
With oil and natural gas realizations down 10% and 23%, respectively, and $2B in adverse unsettled derivatives mark-to-market impacts, Upstream profits decreased 21% Q/Q to $6.45B in the first quarter of 2019.
First-quarter profitability for the Energy Products sector increased 2.7% quarter-over-quarter to $4.18 billion on the back of higher volumes and better mixes, the commencement of the Beaumont refinery expansion, and the absence of adverse unresolved derivatives from the previous quarter.
The corporation has already saved $7.2 billion in structural costs and expects to reach its $9 billion goal by the end of 2023.
Exxon (XOM) has $32.7B in cash at the end of Q1, but according to CFO Kathryn Mikells, the company has no plans to utilise that cash for acquisitions or mergers.
According to a Wall Street Journal article from earlier this month, Exxon (XOM) and Pioneer Natural Resources (PXD) have engaged in preliminary merger negotiations.
The Uaru development is Exxon (XOM)'s sixth offshore Guyana project and was given a final investment decision on Thursday. It is estimated to add 250K boe/day of gross capacity and is scheduled to begin operations in 2026.
