What's going on?
America’s oil giants ExxonMobil and Chevron defied the odds to report some super-slick results on Friday.
What does this mean?
The first quarter of 2022 was something of an oil bonanza, with the war in Ukraine unleashing sky-high energy prices around the world. So you’d think it would have been tough for oil companies to keep the party going last quarter, especially with Brent crude – a key oil benchmark – down by an average of 16% versus the same time last year. But America’s oil giants refused to bow out, keeping a tight grip on spending to keep margins plump. Exxon, for instance, cranked up output from new offshore developments, hitting a record $11.4 billion in profit – its biggest first-quarter profit ever and more than double the year before. And Chevron dodged the bullet too, relying on its oil refining business to plug the gap left by slipping prices – ultimately netting a slick profit of $6.6 billion.
Why should I care?
For markets: Feeding frenzy.
Chevron sees oil markets bouncing back in the second half of the year, banking on China’s reopening to rev up demand. But even if global economies start sputtering, Exxon and Chevron have aces up their sleeves: massive cash reserves (we’re talking $33 billion and $16 billion, respectively). So even if things do go south, they can simply snap up smaller rivals, juicing growth and snagging sweet deals on struggling competitors.
The bigger picture: Like oil and water.
Maintaining this stellar performance could be kind of tricky. See, oil prices have been on a slippery slope lately, thanks to fears a that downturn could hit demand. And it seems like trouble is indeed brewing in the West. US economic growth fell short of expectations last week, after all – and while the eurozone did manage to return to growth, it looks like the bloc is currently just about treading water.