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The corona pandemic is harsh for the American oil giant ExxonMobil. Prices and margins are “unprecedented” under pressure due to oversupply in the market. It doesn’t look much better for the rest of the industry.
American oil companies are struggling. ExxonMobile and Chevron were already struggling with a sharp drop in sales in late 2019. In Corona’s time, ExxonMobil is now red for the first time in decades. As the company announced in Irving, Texas, the bottom line was a loss of $ 610 million in the first quarter.
The industry giants are in dire straits because of falling oil prices, which has accelerated due to recession risks from the crown pandemic. It is the first time since the Exxon-Mobil Oil merger in 1999 that the group closed a quarter with a negative sign.
Due to the difficult market situation, the oil company wrote $ 2.9 billion in amortizations that ultimately ruined the result. For comparison: In the corresponding period last year there was still a profit of $ 2.4 billion. CEO Darren Woods, however, tried to spread optimism: “Our company remains strong and we will face the current slowdown in the market.”
Revenue decreased twelve percent to $ 56.2 billion, although oil production increased two percent to 4.0 million barrels (159 liters) per day. Given the dire situation, Exxon now plans to dramatically cut spending and investment. The crown pandemic severely impacted oil demand, caused oversupply in the market and created unprecedented pressure on prices and margins, Woods said.
Historical accident in the oil market
The second largest US oil company, Chevron, is also struggling. Behind the first quarter, sales fell 13 percent to $ 29.7 billion. Profit increased by more than a third to $ 3.6 billion, as the company announced in San Ramón. Here Chevron benefited from special income and tax effects. Exxon’s rival is further reducing investment in the crisis. Instead of $ 16 billion this year, only $ 14 billion should go online this year. At the end of March, Chevron had already cut subsidies and investments and stopped buying its own shares.
On Thursday, the British-Dutch oil and gas multinational Shell cut its dividends for the first time since World War II after a quarterly loss. Competitor BP had decided not to do so despite a sharp drop in earnings on Tuesday. Chevron and Exxon have so far also resisted dividend cuts. But the pressure is mounting. There was recently a historic collapse in the oil market: the price of a futures contract fell into negative territory for the first time, so suppliers paid buyers money for the purchase. The Corona crisis is depressing oil demand when supply is already too high and storage capacity is becoming increasingly scarce.
