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US oil giants return to profitability in the first quarter with rising oil prices

After a series of losses, ExxonMobil and Chevron on Friday reported a return to profitability in the first quarter, driven by a significant jump in oil prices.

The results, which come amid a similar round of profits by Royal Dutch Shell, Total and other European oil giants, point to a much better demand outlook compared to last year, when oil prices plummeted in the middle of the year. first quarter when the coronavirus crisis closed much of the economy.

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“The gains were strengthened mainly due to higher oil prices as the economy recovered,” said Chevron Chief Executive Mike Wirth.

However, large oil companies still face major challenges, including activist shareholder campaigns at annual meetings next month on their response to climate change.

Both U.S. oil companies also face weakness in their downstream businesses amid lukewarm demand for petroleum products, especially jet fuel.

ExxonMobil, which recorded losses in all four quarters in 2020, reported profits of $ 2.7 billion in the first quarter. Revenues increased 5.3% to $ 59.1 billion.

The company said the average price of crude oil sold rose 42 percent compared to the fourth quarter, while natural gas prices rose 33 percent.

Conditions in the downstream business have improved compared to the fourth quarter, “but have remained below the 10-year lows driven by market oversupply and high product inventory levels,” said ExxonMobil.

But the company has seen heady conditions in its chemical business, where profits have increased due to “strong continued demand, global shipping restrictions and continued supply disruptions, especially in North America”.

At Chevron, which reported losses in the past three quarters, profit was $ 1.4 billion, down 61.7% from the same period last year, due in part to a sharp drop in subsequent earnings.

Revenues increased 1.7 percent to $ 32 billion.

Chevron also benefited from higher oil prices compared to the 2020 period, although international natural gas prices fell in the most recent quarter compared to the previous year.

With companies like Total and BP making investments in renewable energy and committing to zero net emissions targets, the US oil giants are under increasing pressure to tackle climate change.

ExxonMobil said it has made progress on its “energy transition strategy”, which would lead it to develop large-scale carbon capture and storage (CCS) projects.

ExxonMobil Chief Executive Darren Woods rejected the use of investments in solar and wind energy as a “litmus test” for the company’s commitment to climate change, saying in a conference call with analysts that the oil giant is “in early stages of a new business “with CCS.

However, for the business to take off, government policies will be needed to encourage carbon reductions, as well as new structures to store carbon dioxide and install pipelines and facilities, said Woods.

At its annual meeting next month, the oil giant faces the challenge of activist investor group Engine No. 1, which has appointed competing directors to more strongly change the company’s response to climate change.

In a presentation earlier this week, Engine No. 1 dismissed the other climate-related efforts of CCS and ExxonMobil as ideals that “mainly generated publicity”.

“ExxonMobil paints an unreal picture of the likelihood that carbon capture will eliminate the need for change,” said the group.

Chevron also faces a series of climate-related proposals at its annual meeting in May, including a vote directing the company to analyze how its business would cope if an International Energy Agency scenario of “net zero” emissions by 2050 was carried out.

Chevron is asking shareholders to reject the proposal in the wake of the company’s continued efforts for the energy transition, arguing that the report is “unnecessary”.

ExxonMobil’s shares fell 2.9 percent to $ 57.24, while Chevron fell 3.6 percent to $ 103.07. However, both companies have increased by more than 23% so far in 2021.

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