Improved third quarter results indicate oil leaving bearish territory

The third quarter earnings of the five biggest oil companies seemed to be consolidating the notion that the oil sector is making a recovery. From the results, all of the oil majors have reported as much as 50 percent increase net earnings.

Royal Dutch Shell reported a near 50 percent rise in net profit for the third quarter. Net profit attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, came in $4.1 billion, versus $2.7 billion in the same quarter a year ago. This compared to a company-provided analyst consensus of $3.6 billion. It also beat the Reuters estimate which was $3.569 billion.

Shell said the earnings reflected higher contributions from its downstream and upstream operations (which refer to both the refining division and exploration units) and its integrated gas unit.

American oil giants, Exxon Mobil Corporation announced estimated third quarter 2017 earnings of $4 billion, compared with $2.7 billion a year earlier as commodity prices improved and performance in the upstream and downstream strengthened.

The world’s largest publicly-traded oil company credited higher commodity prices in the third quarter, as well as better performance in it exploration and production and refining businesses.

Italian oil giant, Eni which is about one-third government-owned, returned to profit in the same period posting earnings of $400 million, compared with a loss of 562 million euros a year earlier.

Chevron, American multinational oil company similarly, reported net earnings of $2billion, compared with $1.3billion reported in the same period in 2016.

French oil and gas major Total, reported a 29 percent jump in third-quarter net adjusted profit for the quarter hitting $2.7 billion, as ramp-ups and new projects lifted production. High demand for petroleum products, the company said also led to a sharp increase in its refining margin.

“A 50 percent increase in earnings through solid business performance and higher commodity prices is a step forward in our plan to grow profitability,” said Darren Woods, chairman and chief executive officer of ExxonMobil.

ExxonMobil’s upstream earnings rose to $1.6 billion as oil prices hovered around $50 from about $40 in the same period last year.

Analysts had expected poorer margins in the downstream as Hurricane Harvey was forecasted to knock out over 15 percent of US refining capacity which translates to about 2.45 million barrels per day which shut in after Tropical Storm Harvey flooded plants and shut seaports in Houston, the capital of US oil production.

But margins held. ExxonMobil’s downstream results increased to $1.5 billion buffered by $380 million Canadian retail assets sale. Total said its European refining margin indicator rose sharply to $48.2 per tonne in the third quarter of 2017 compared with $41.4 in the third quarter of 2016 thanks to strong demand for products after last month’s hurricane Harvey led to numerous shutdowns of refining capacity.

“The downstream benefited from favorable refining margins and increased its results by 18 percent compared to the second quarter, despite the impact of Hurricane Harvey on American operations,” said chief executive Patrick Pouyanne in a statement.

These positive earnings recorded by oil majors raises the prospect that new projects will kick off and old ones may be completed.

It is also cheery news for oil companies that have had to weather the storm posed by low oil prices amid a glut in oil supply and lackluster demand over the last three years.

There are signs that oil markets are rebalancing, however, particularly as major oil exporters including OPEC and non-OPEC countries continue with an agreement to cut oil output.

ISAAC ANYAOGU