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Offshore oil drillers were about the worst place to be in 2020 as oil prices were falling and demand for crude seemed to be seeping away. Now, the stocks may be the ones to own as investors realize that oil will be needed to make the world go around for decades.
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COLOMBO, Sri Lanka — A U.S. petroleum company signed an agreement with Sri Lanka on Thursday allowing it to import and sell fuel in the country, less than a month after Chinese petroleum giant Sinopec also acquired rights to enter the retail market, as the Indian Ocean nation grapples with an economic and energy crisis.
RM Parks Inc. signed the agreement in collaboration with Shell and will be able to import, distribute and sell petroleum products for 20 years, the Power and Energy Ministry said.
It can sell petroleum products through 150 fuel stations currently operated by state-run Ceylon Petroleum Corp., and also invest in 50 new fuel stations, the ministry said.
The agreement will help “address the foreign exchange crisis in Sri Lanka and ensure a steady supply of fuel,” the president’s office said in a statement.
RM Parks says it has supplied a variety of fuel brands to stations in California for almost 50 years.
Sri Lankan authorities have opened the retail fuel market to more foreign companies in an effort to solve the energy crisis as the country’s depleted foreign reserves hinder imports of oil.
The foreign companies are required to use their own funds to purchase fuel, without depending on Sri Lankan banks for foreign exchange.
Sri Lankan authorities have already granted approval to three foreign companies to enter the retail fuel market, and two have signed contracts. Australia’s United Petroleum has yet to finalize an agreement.
Sinopec signed a contract on May 22 and will be able to begin operations in Sri Lanka within 45 days after the issuance of its license.
An Indian oil company was already operating in Sri Lanka.
When the economic crisis hit Sri Lanka last year, the government didn’t have enough foreign currency to import fuel, triggering severe shortages. Sri Lankans are still allotted limited amounts of fuel, which is distributed using a QR code system.
The economic crisis also resulted in severe shortages of essentials such as medicines, fuel, cooking gas and food, leading to angry protests that forced then-President Gotabya Rajapaksa to flee the country and resign last summer.
Sri Lanka defaulted on repayment of its foreign debts and sought the support of international partners and organizations to resolve the crisis.
The International Monetary Fund approved a nearly $3 billion rescue program in March which will run for four years. Sri Lanka’s foreign debt exceeds $51 billion, of which $28 billion must be repaid by 2027. Sri Lanka has started negotiations with creditors on debt restructuring.
Last week, the IMF said Sri Lanka is showing signs of economic improvement, but its recovery still faces challenges. It said the economy is expected to resume growing in 2024 after contracting 3% this year if the country successfully implements promised economic reforms.
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Oil futures opened sharply higher Sunday evening, after Saudi Arabia agreed to deliver an additional 1 million–barrel daily production cut next month as the Organization of the Petroleum Exporting Countries and its allies moved to extend existing production targets.
CL.1,
CLN23,
remained up $1.49, or 2.1%, at $73.23 a barrel on the New York Mercantile Exchange, after trading as high as $75.06.
BRNQ23,
the global benchmark, gained $1.59, or 2.1%, to trade at $77.72 a barrel on ICE Futures Europe, after touching $78.73 after the open.
Saudi Arabia on Sunday said it would cut oil output by 1 million barrels a day in July, and that the reduction could be extended if needed. The announcement came as OPEC+ agreed to extend current production levels through the end of 2024 at a contentious meeting in Vienna.
See: Saudis to cut oil production by 1 million barrels a day in July as OPEC+ extends output deal
OPEC+ agreed last October to cut production by 2 million barrels a day. Some OPEC+ members in early April announced further cuts totaling 1.6 million barrels a day through year-end, including 500,000 barrels a day in reductions by Saudi Arabia.
Saudi Energy Minister Abdulaziz bin Salman last month warned that short sellers should “watch out” and that they would be “ouching” much as they did in early April, when the surprise cuts caused a sharp, but short-lived, spike in crude prices.
The outcome of the meeting reinforces Saudi Arabia’s “uneasiness with the level of short positions in the market rather than signaling concerns around demand outlook,” said Giacomo Romeo, energy equity analyst at Jefferies, in a Sunday evening note to clients.
“The open-ended part of the measure was likely put in place to discourage future short positioning,” he wrote.
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BEIJING (AP) — Asian stock markets sank Wednesday ahead of a vote by Congress on a deal to avert a government debt default, while a downturn in Chinese factory activity deepened, adding to signs global economic activity is weakening.
Shanghai, Tokyo, Hong Kong and Sydney retreated. Oil prices declined.Wall Street’s benchmark S&P 500 index edged up less than 0.1% on Tuesday as President Joe Biden and U.S. House Speaker Kevin McCarthy tried to line up votes in support of their deal to allow the government to borrow more. Without…
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COLOMBO, Sri Lanka — Chinese petroleum giant Sinopec signed an agreement with Sri Lanka on Monday to enter the South Asian island country’s retail fuel market as it struggles to resolve a worsening energy crisis amid an unprecedented economic upheaval.
The contract agreement would enable Sinopec to import, store, distribute and sell petroleum products in Sri Lanka, which has had a fuel shortage for more than a year.
The move comes as Beijing looks to consolidate investments in Sri Lanka’s ports and energy sector amid growing security concerns raised by the island nation’s immediate neighbor, India, which considers Sri Lanka to be its strategic backyard.
Sri Lanka, which is facing a foreign exchange crisis, hopes the deal will help to resolve its energy crisis.
The agreement signed Monday in the Sri Lankan capital, Colombo, was made to “ensure uninterrupted fuel suppliers to consumers,” the president’s office said in a news release.
Under the pact, Sinopec will be granted a 20-year license to operate 150 fuel stations currently operated by Sri Lanka’s state-run Ceylon Petroleum Corporation, and to invest in 50 new fuel stations and in the country’s energy sector, the nation’s Power and Energy Ministry said in a statement.
Sinopec can start operations within 45 days of license issuance and “this development brings hope for a more stable and reliable fuel supply, boosting the country’s energy sector and providing assurance to consumers,” the president’s office said.
When the economic crisis hit Sri Lanka last year, the government couldn’t find foreign currency to import fuel, triggering a severe shortage that lasted for more than two months and forcing people to endure long lines at fuel stations. Sri Lankans are still allotted limited amounts of fuel that is distributed according to a QR code system.
In an effort to resolve the crisis, Sri Lanka opened its retail fuel market to foreign petroleum companies, asking them to use their own funds to purchase fuel, without depending on Sri Lankan banks for foreign exchange. The government has given approval to two other foreign companies — Australia’s United Petroleum and U.S. company RM Parks in collaboration with Shell — to enter its fuel market.
An Indian oil company already operates in Sri Lanka. But, India is concerned over the growing influence of China in Sri Lanka, which sits along one of the world’s busiest shipping routes.
Sri Lanka borrowed heavily from China over the past decade for infrastructure projects including a seaport, airport and a city being built on reclaimed land. The projects failed to earn enough revenue to pay for the loans, a factor in Sri Lanka’s economic woes. In 2017, Sri Lanka leased the seaport in Hambantota to China because it could not pay back the loan.
China accounts for about 10% of Sri Lanka’s loans, trailing only Japan and the Asian Development Bank.
Sri Lanka’s economic crisis resulted in severe shortages of essentials such as medicines, fuel, cooking gas and food, leading to angry protests that forced then-President Gotabaya Rajapaksa to flee Sri Lanka and resign last summer.
Sri Lanka defaulted payment of foreign debts and sought the support of international partners and organizations to resolve the crisis.
The IMF approved a nearly $3 billion rescue program for in March which will run for four years. Sri Lanka authorities are now discussing debt restructuring with foreign creditors.
___
This story was updated to correct that the quote that begins, “This development brings hope…,” is from the president’s office, not the Power and Energy Ministry.
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By Will Horner
China’s demand for oil is growing at a faster-than-expected pace, threatening to tighten crude markets and send oil prices higher as supply struggles to keep up, the International Energy Agency said.
The Paris-based agency’s latest outlook points to a widening divide between booming demand for crude across the developing world and lackluster demand in Europe and North America where economic prospects look bleak.
It also highlights a growing disconnect between oil prices–which have tumbled to their lowest levels in around 16 months in recent weeks–and expectations that strong demand and limited supplies will prompt a sharp deficit that many analysts expect to lift oil prices.
In its closely watched monthly oil market report, the IEA raised its forecast for global oil demand growth this year by 200,000 barrels a day, to 2.2 million barrels a day. It said total demand would stand at 102 million barrels a day, 100,000 barrels a day more than it forecast last month.
China’s share of that increase, already expected to be large, appeared to be growing and “continues to surpass expectations”, the IEA said. The nation’s crude demand hit a record of 16 million barrels a day in March while China will account for 60% of all oil demand growth this year, the IEA said.
Write to Will Horner at william.horner@wsj.com
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DUBAI, United Arab Emirates — Oil giant Saudi Aramco reported a first-quarter profit on Tuesday of $31.88 billion, down nearly 20% from the same period last year as energy prices have sunk over global recession concerns.
The firm known formally as the Saudi Arabian Oil Co. blamed the drop — compared to $39.47 billion in the same quarter last year — on the lower crude oil prices. Aramco made a $30.73 billion profit in the fourth quarter of last year.
“The results reflect Aramco’s continued high reliability, focus on cost and our ability to react to market conditions as we generate strong cash flows and further strengthen the balance sheet,” Aramco President and CEO Amin H. Nasser said in a statement.
Aramco separately said that it “believes it is well positioned to withstand fluctuating commodity prices through its low-cost upstream production.” Benchmark Brent crude traded early on Tuesday around $76 a barrel, down from a high of $125 in the last year.
Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.
In March, Aramco announced earning $161 billion last year, claiming the highest-ever recorded annual profit by a publicly listed company and drawing immediate criticism from activists amid concerns about climate change.
While saying Aramco was “working to further reduce the carbon footprint of our operations,” Nasser remained bullish on the world’s need for crude and natural gas.
“We are also moving forward with our capacity expansion, and our long-term outlook remains unchanged as we believe oil and gas will remain critical components of the global energy mix for the foreseeable future,” he added.
Those earnings came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and natural gas in Western markets.
However, oil prices have sunk in recent weeks amid fears of a coming recession as central banks in the U.S. and elsewhere raise interest rates to try to tame inflation. That’s even after OPEC+, a group of countries including the cartel and those outside it like Russia, announced surprise production cuts in April totaling up to 1.15 million barrels. Recent OPEC+ cuts have seen U.S. President Joe Biden warn of potential “consequences” for Riyadh, even though his national security adviser just visited the kingdom and met with Saudi Crown Prince Mohammed bin Salman.
Aramco stock traded at $9.55 a share on Riyadh’s Tadawul stock exchange at close Monday, giving the oil firm a $2.1 trillion valuation and putting it only behind Apple and Microsoft for the highest market capitalization in the world. Just a sliver of its worth, under 2%, is traded on the exchange. The Saudi government holds 90% of the company, with about 8% held by Saudi sovereign wealth funds.
Separately Tuesday, Aramco announced it would begin issuing performance-based dividends to stockholders, on top of the dividends it already offers. Its base dividend in the fourth quarter of last year was $19.5 billion, ranking it as the highest in the world for a publicly traded firm.
___
Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.
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Oil demand is likely to hold up longer than many people expect during the anticipated transition to electric vehicles. And changes in the industry point to oilfield services companies as good long-term growth investments as offshore production ramps up.
Below is a list of oil producers and related companies favored by two analysts who have followed the industry for decades.
U.S….
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The Organization of the Petroleum Exporting Countries and its allies said they decided Sunday to cut production in an effort to support oil-market stability, but that offers little comfort to consumers worried about inflation and an expected spike in fuel demand during the coming summer driving season.
The surprise output reduction by the group known as OPEC+ starting in May also comes at a particularly vulnerable time for the U.S., which may not be able to quickly increase its own production.
“The nature and timing of the decision are shocking, since prices have been only moderate pressured from the banking mini-crisis and the market is expected to tighten later this year,” said Michael Lynch, president of Strategic Energy & Economic Research.
“OPEC+, and especially the Saudis, seem to be signaling a strong desire to punish short sellers and pre-empt possible demand weakness,” he told MarketWatch. Also, “the impact on inflation…could mean an anemic summer driving season.”
OPEC and its allies, a group known as OPEC+, announced voluntary production “adjustments” on Sunday that will take effect starting in May and run through to the end of the year.
The move was unusual, as there was no indication that any change to production would be made and OPEC+ ministers weren’t scheduled to officially hold an output decision-making meeting until June 4.
The OPEC+ Joint Ministerial Monitoring Committee, however, did hold a meeting on Monday, as it does every two months. The committee has no ability to make decisions on production, but has the authority to request an OPEC and non-OPEC ministerial meeting at any time to address market developments.
The JMMC had been expected to discuss a number of oil-market issues, and confirm that previously announced cuts of 2 million barrels a day would remain in effect. The committee on Monday indeed reaffirmed its commitment to that previous agreement, but also pointed out Sunday’s announcement.
“Unlike cuts in the past that were more ‘paper cuts’ to quotas with many countries already producing below quota, these are real voluntary cuts from countries producing at or above quotas,” said Rebecca Babin, senior energy trader at CIBC Private Wealth U.S., in emailed commentary. That means this will be “far more impactful than the 2 million barrels cut” announced in October 2022.
Saudi Arabia will take on the biggest reduction, cutting oil output by 500,000 barrels a day. Other barrel-per-day cuts include Iraq with 211,000, United Arab Emirates 144,000, Kuwait 128,000, Kazakhstan 78,000, Algeria 48,000, Oman 40,000 and Gabon 8,000. Those total 1.157 million barrels a day.
The cuts, however, are in addition to the previous OPEC+ production cuts of 2 million barrels a day, as well as the extension of Russia’s reduction of 500,000 barrels a day in retaliation to western oil-price caps and sanctions. That brings the total output reductions to 3.657 million barrels a day.
Saudi Arabia’s Ministry of Energy on Sunday, as well as the JMMC in a statement Monday, said that the cuts are a “precautionary measure aimed at supporting the stability of the oil market.”
Some news reports and analysts have speculated that Saudi Arabia, a member of OPEC and among the world’s top oil producers, and other major oil producers made the surprise move to cut output because of recent comments made by U.S. Energy Secretary Jennifer Granholm.
On March 23, Granholm said that it may take years for the U.S. to refill its Strategic Petroleum Reserve. She appeared to walk back those comments on March 28, with Reuters reporting that she said the U.S. could start buying back crude oil for the SPR late this year.
The Biden administration last year announced the emergency sale of 180 million barrels of SPR crude to help lower gasoline prices, and has said it would refill the reserve when oil prices fell to around $70 a barrel.
U.S. benchmark West Texas Intermediate crude oil fell below $70 a barrel to their lowest level in 15 months on March 21.
The OPEC+ decision took the financial market by surprise.
“If fully delivered, the announced cut would further tighten an already fundamentally tight oil market, driving the Brent benchmark towards $100 per barrel sooner than previously expected, and would push the price to around $110 per barrel this summer,” said Jorge Leon, senior vice president at Rystad Energy.
Before the new OPEC+ cuts, Rystad Energy was anticipating the crude-oil market to be in a supply deficit to the “tune of 1.4 million” barrels a day between May and August, he said in emailed commentary. The voluntary cuts will put “upside pressure on prices from a fundamentals perspective, offering support of around $10 per barrel.”
On Monday, the front-month May WTI oil futures contract
CLK23,
CL.1,
climbed 6.4% to trade above $80.50 a barrel ahead of the closing bell on the New York Mercantile Exchange. Global benchmark June Brent oil
BRNM23,
BRN00,
rose $4.75, or 6.3%, to close at $80.42 a barrel on ICE Futures Europe.
“Positioning in crude is extremely light after the recent financial market driven weakness,” said Babin. Last week’s rally was driven primarily by short covering and modest re-engagement from long buyers,” she said, adding that the long position, or bets that oil will rise in value, is “very modest, with the managed money long-short ratio at 2.5, the lowest since December 2022.”
Large short positions held by speculative traders can make for more explosive rallies as “weak-handed” players are forced to buy futures to close out losing trades.
Craig Golinowski, managing partner at Carbon Infrastructure Partners, also pointed out to MarketWatch that paper market for oil is “very thin.” Fewer participants and financial flows have created downside pressure on oil, he said, so OPEC is “physically managing production to maintain a tight market to ensure investment into production remains stable, regardless of the paper market for oil.”
The energy market saw broad gains, with company shares and exchange-traded funds, including the Energy Select Sector SPDR Fund
XLE,
rallying in the wake of the OPEC+ news.
St. Louis Federal Reserve President James Bullard on Monday said the spike in oil prices after the OPEC+ cut announcement may make the central bank’s inflation-fighting job “a little more difficult,” though it is too soon to know for sure.
The latest spike in oil prices may “play a hand in what the Fed does next regarding its fight against inflation,” particularly if the latest jump in oil is sustained as oil at the current level “won’t be doing the inflation rate any favors,” said Tim Waterer, chief market analyst at Kohle Capital Markets.
Read: Oil-production cuts could force Fed to raise interest rates even higher to fight inflation
In the past, OPEC+ has been concerned about the loss of oil-market share when it decides to make production cuts.
This time, however, there is “limited threat to market share,” said CIBC Private Wealth’s Babin.
Previously, when OPEC+ cut production, they would lose market share to U.S. shale oil producers, she said. “However, “U.S. shale producers have entered a period where growth is limited due to financial discipline.”
Recent developments in regional banks has “likely lowered shale producers’ ability to quickly get capital to increase production,” said Babin.
Total U.S. petroleum production stood at 12.2 million barrels a day as of the week ended March 24, down 100,000 barrels per day from a week earlier, according to data from the Energy Information Administration.
OPEC would usually “hesitate to reduce barrels, with fears of ceding market share to U.S. shale, but the slowing of U.S. production and their dedication to a disciplined approach has alleviated the Saudi’s fear of rapid U.S. growth,” said Alex Hodes, energy analyst at StoneX.
Meanwhile, James Swanston, Middle East and North Africa economist at Capital Economics, in a note said the OPEC+ move was likely motivated by geopolitics and Saudi Arabia’s “shift away from the West.”
Saudi Arabia’s ties with the U.S. are “fraying,” he said.
Swanston also said the production decision has implications for the future of OPEC+ oil policy, as well as the “patience of members, particularly, the UAE.”
The U.A.E. agreed to these voluntary output cuts, but it was reported last month that officials were growing impatient at the bearish OPEC+ stance and had discussed internally whether to leave the group, said Swanston.
The Wall Street Journal: Saudi Arabia and U.A.E. Clash Over Oil, Yemen as Rift Grows
The U.A.E. wants to “increase oil output sooner rather than later as shown by its move to bring forward its oil production capacity target from 3.1 [million barrels per day] currently to 5 million bpd by 2027,” instead of the year 2030, said Swanston.
He said the U.A.E. had twice previously threatened to leave OPEC+ and that there was speculation that the U.A.E. was strongly against the Saudi-led decision to cut OPEC+ oil output quotas by 2 million bpd in October.
“If the OPEC+ strategy of lower oil production persists, then tensions could escalate, and the U.A.E. could ultimately opt to leave OPEC+,” Swanston said.
The production cuts will take effect in May, which is “right ahead of Memorial Day and the start of U.S. driving season,” said Stacey Morris, head of energy research with VettaFi.
Given that, “it could be another summer with painful prices at the [gasoline] pump,” she said.
The average price for regular unleaded gasoline stood at $3.506 a gallon on Monday, up from $3.439 a week ago, but down from $4.192 a year ago, according to AAA.
Read: The surprise OPEC+ oil production cuts will increase gas prices — here’s how much
Still, some traders may interpret the OPEC+ cut as a sign of weaker than expected demand for physical markets, given that OPEC+ possesses “some of the best information available in regards to the global physical oil markets,” said Rob Thummel, portfolio manager at Tortoise.
However, “ we still expect global oil demand to accelerate throughout 2023, reaching a record high in the second half the year,” he said.
Global oil inventories are below normal and will likely “remain below normal as higher demand and less supply deplete inventories throughout the year,” Thummel said, noting that Tortoise expects oil prices to be range bound between $85 and $95 for the year.
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Surprise crude oil production cuts from Saudi Arabia and other oil-rich countries shouldn’t produce worries of skyrocketing gas costs for U.S. drivers still smarting from last year’s pump price shocks, according to fuel industry experts.
At a time when gas prices are already increasing because of rising seasonal demand, the slashed crude oil output that Saudi Arabia announced Sunday will translate into higher prices, they say. But compared to last year — when energy markets were absorbing the initial impact of Russia’s invasion of Ukraine — the altitude on those gas price increases may not feel so steep.
On Monday, the national average for a gallon of gas was $3.50, according to AAA. That’s around 10 cents more than a month ago, but almost 70 cents less than the $4.19 average cost one year ago.
The effects of decreased oil production could translate into initial price increases of up to 15 cents per gallon, according to two different energy sector watchers.
There’s Patrick De Haan, head of petroleum analysis at GasBuddy.
At OPIS, an outlet focused on energy sector news and analytics, Chief Oil Analyst Denton Cinquegrana said he was previously expecting summer gas prices to average around $3.60.
“This move probably boosts that by about 10 – 15 cents to about $3.70-3.75/gal.” Cinquegrana told MarketWatch.
OPIS is owned by Dow Jones, which also owns MarketWatch.
It’s possible for gas price averages to hit around $3.60 in the next week or so, he said. The other 10 to 15 cents might filter into retail pump prices later this month or in early May, according to Cinquegrana.
The surprise move came from Saudi Arabia and other members of OPEC+, the Organization of the Petroleum Exporting Countries and allies, including Russia. In Saudi Arabia, officials were reportedly “irritated” by recent remarks from U.S. Energy Secretary Jennifer Granholm.
After the Biden administration tapped the country’s strategic petroleum reserve to combat last year’s high gas costs, Granholm said it will difficult to restock the reserve.
By May, more than 1 million barrels of oil a day will be slashed from output in the global energy markets. That’s in addition to OPEC+ production cuts announced last fall.
In cost breakdowns for a gallon of gas, the price of crude oil is responsible for more than half the price tag, according to the U.S. Energy Information Administration.
In Monday morning trading, the price of West Texas Intermediate crude for May delivery jumped 6% to just over $80 on the New York Mercantile Exchange.
For context, when gas prices were breaking records last year, the costs of West Texas Intermediate crude were in the triple digits. While retail prices surged in early March 2022, West Texas Intermediate crude briefly traded for more than $130 during the trading day on March 7, 2022.
The national average for a gallon of gas hit a record $5.01 in mid-June, according to AAA. In the current context, Cinquegrana doesn’t see a return to $5 gas averages, he said. Gas prices vary across the nation. California drivers are paying $4.80 on average while Mississippi drivers are paying $3.02 per gallon.
Even if price increases are not as sharp as last year, hot inflation is retreating slowly. So any extra costs are unwelcome to millions of American drivers who are living their lives and more frequently commuting to the office.
Like last year, oil prices are poised to increase, said AAA spokesman Devin Gladden.
But the economy’s background noise right now could dampen the impact as downturn worries keep sticking around, he added. Furthermore, there can be discrepancies in the announced production reductions and the amounts that are actually reduced, Gladden said.
“If recessionary concerns persist in the market, oil price increases may be limited due to the market believing lower oil demand will lead to lower prices this year,” he said.
On Monday, energy sector stocks and related exchange traded funds were climbing after the production cut news. In early afternoon trading, the Dow Jones Industrial Average
DJIA,
was up more than 200 points, or 0.7%, while the S&P 500
SPX,
is little changed and the Nasdaq Composite
COMP,
dropped 100 points, or 0.8%.
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DUBAI, United Arab Emirates — Saudi Arabia and other major oil producers on Sunday announced surprise cuts totaling up to 1.15 million barrels per day from May until the end of the year, a move that could raise prices worldwide.
Higher oil prices would help fill Russian President Vladimir Putin’s coffers as his country wages war on Ukraine and force Americans and others to pay even more at the pump amid worldwide inflation.
It was also likely to further strain ties with the United States, which has called on Saudi Arabia and other allies to increase production as it tries to bring prices down and squeeze Russia’s finances.
The production cuts alone could push U.S. gasoline prices up by roughly 26 cents per gallon, in addition to the usual increase that comes when refineries change the gasoline blend during the summer driving season, said Kevin Book, managing director of Clearview Energy Partners LLC. The Energy Department calculates the seasonal increase at an average of 32 cents per gallon, Book said.
So with an average U.S. price now at roughly $3.50 per gallon of regular, according to AAA, that could mean gasoline over $4 per gallon during the summer.
However, Book said there are a number of complex variables in oil and gas prices. The size of each country’s production cut depends on the baseline production number it is using, so the cut might not be 1.15 million. It also could take much of the year for the cuts to take effect. Demand could fall if the U.S. enters a recession caused by the banking crisis. But it also could increase during the summer as more people travel.
Even though the production cut is only about 1% of the roughly 100 million barrels of oil the world uses per day, the impact on prices could be big, Book said.
“It’s a big deal because of the way oil prices work,” he said. “You are in a market that is relatively balanced. You take a small amount away, depending on what demand does, you could have a very significant price response.”
Saudi Arabia announced the biggest cut among OPEC members at 500,000 barrels per day. The cuts are in addition to a reduction announced last October that infuriated the Biden administration.
The Saudi Energy Ministry described the move as a “precautionary measure” aimed at stabilizing the oil market. The cuts represent less than 5% of Saudi Arabia’s average production of 11.5 million barrels per day in 2022.
Iraq said it would reduce production by 211,000 barrels per day, the United Arab Emirates by 144,000, Kuwait by 128,000, Kazakhstan by 78,000, Algeria by 48,000 and Oman by 40,000. The announcements were carried by each country’s state media.
Russia’s Deputy Prime Minister Alexander Novak meanwhile said Moscow would extend a voluntary cut of 500,000 until the end of the year, according to remarks carried by the state news agency Tass. Russia had announced the unilateral reduction in February after Western countries imposed price caps.
All are members of the so-called OPEC+ group of oil exporting countries, which includes the original Organization of the Petroleum Exporting Countries as well as Russia and other major producers. There was no immediate statement from OPEC itself.
The cuts announced in October — of some 2 million barrels a day — had come on the eve of U.S. midterm elections in which soaring prices were a major issue. President Joe Biden vowed at the time that there would be “consequences” and Democratic lawmakers called for freezing cooperation with the Saudis.
Both the U.S. and Saudi Arabia denied any political motives in the dispute.
Since those cuts, oil prices have trended down. Brent crude, a global benchmark, was trading around $80 a barrel at the end of last week, down from around $95 in early October, when the earlier cuts were agreed.
Analysts Giacomo Romeo and Lloyd Byrne at Jefferies said in a research note that the new cuts should allow for “material” reductions to OPEC inventory earlier than expected and could validate recent warnings from some traders and analysts that demand for oil is weakening.
Kristian Coates Ulrichsen, a Gulf expert at Rice University’s Baker Institute for Public Policy, said the Saudis are determined to keep oil prices high enough to fund ambitious mega-projects linked to Crown Prince Mohammed bin Salman’s Vision 2030 plan to overhaul the economy.
“This domestic interest takes precedence in Saudi decision-making over relationships with international partners and is likely to remain a point of friction in U.S.-Saudi relations for the foreseeable future,” he said.
Saudi Arabia’s state-run oil giant Aramco recently announced record profits of $161 billion from last year. Profits rose 46.5% when compared to the company’s 2021 results of $110 billion. Aramco said it hoped to boost production to 13 million barrels a day by 2027.
The decades-long U.S.-Saudi alliance has come under growing strain in recent years following the 2018 killing of Saudi dissident Jamal Khashoggi, a U.S.-based journalist, and Saudi Arabia’s war with the Iran-backed Houthi rebels in Yemen.
As a candidate for president, Biden had vowed to make Saudi Arabia a “pariah” over the Khashoggi killing, but as oil prices rose after his inauguration he backed off. He visited the kingdom last July in a bid to patch up relations, drawing criticism for sharing a fistbump with Crown Prince Mohammed.
Saudi Arabia has denied siding with Russia in the Ukraine war, even as it has cultivated closer ties with both Moscow and Beijing in recent years. Last week, Aramco announced billions of dollars of investment in China’s downstream petrochemicals industry.
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Oil prices spiked late Sunday, after Saudi Arabia led a surprise oil production cut across several OPEC+ nations that will remove more than 1 million barrels of oil a day from May.
In an announcement on Sunday, Saudi Arabia’s Ministry of Energy stated that the kingdom will implement a voluntary cut of 500,000 barrels a day from May until the end of 2023, in conjunction with other countries.
It said that the “voluntary cut is in addition to the reduction in production” agreed at the OPEC meeting in October and “is a precautionary measure aimed at supporting the stability of the oil market.” OPEC+ agreed in October to cut production by two million barrels a day from November, a move that angered the Biden administration.
Russia’s deputy prime minister, Alexander Novak, said his country would extend a March production cut of 500,000 barrels a day through the end of the year. OPEC+ is made up of members of the Organization of the Petroleum Exporting Countries and its allies, including Russia.
“Today, the world oil market is experiencing a period of high volatility and unpredictability due to the ongoing banking crisis in the U.S. and Europe, global economic uncertainty and unpredictable and shortsighted energy policy decisions. At the same time, predictability in the global oil market is a key element in ensuring energy security,” Novak said in a statement.
News of the production cuts sent prices soaring late Sunday. Front-month West Texas Intermediate crude for May delivery
CL.1,
topped $80 a barrel while Brent crude
BRN00,
the global benchmark, surpassed $85 a barrel.
The cuts come after a first quarter that saw a sharp decline in crude prices. Oil bulls were disappointed that China’s lifting of strict COVID curbs didn’t provide stronger support to prices, while aggressive tightening by central banks and fears that banking woes in the U.S. and Europe could turn into a full-fledged crisis stoked recession fears.
West Texas Intermediate crude for May delivery, which ended at $75.678 a barrel on Friday, suffered a March loss of 1.8% and a quarterly decline of 5.7%, according to Dow Jones Market Data. Brent crude fell 4.9% in March and 7.2% in the first quarter, ending Friday at $79.77 a barrel.
Elsewhere, Kuwait’s oil ministry said the country will cut 128, 000 barrels a day, while the United Arab Emirates said it would cut its production by 144,000 barrels a day, according to a statement by Energy Minister Suhail Al Mazrouei, reported by Attaqa Breaking News. Oman said it would implement a voluntary cut of 40,000 barrels a day. Kazakhstan said it would cut by 78,000 barrels a day and Algeria said it would cut by 48,000 barrels a day.
Ole Hansen, chief commodities strategist at Saxo Bank, said the announcement “came out of the blue.”
“Producers were clearly frustrated by the recent slump which was speculative more than fundamentally driven. They will likely achieve a return to the $80s while also trying to pre-empt a smaller than expected increase in global oil demand in the coming months. Remember most of the +2 m b/d increase expected for this year is backloaded into the second half with plenty of room for error should economic slowdown be as severe as currently priced in by the market through expectations of U.S. rate cuts,” Hansen told MarketWatch.
“The Saudi oil minister love[s] to wrong foot the market, especially when it comes to hurting speculative short sellers,” said Hansen.
The move also comes as the U.S., Europe and elsewhere continue to battle inflation. Oil prices have fallen sharply over the last 12 months, after spiking to more than $120 a barrel following Russia’s invasion of Ukraine last year. Brent was down roughly 24% from a year earlier at Friday’s close.
The new cuts, if fully implemented, should make for a significant draw on crude inventories in the second quarter as opposed to previous expectations for an early third-quarter draw, said Giacomo Romeo, energy equity analyst at Jefferies, in a note.
“The only potential downside to this decision is that bears in the market could perceive the cut as a validation of the recent demand concerns,” he wrote, noting that compliance with past targets has also been in issue.
The U.A.E., for example, was seen producing around 200,000 barrels a day above its target for a few months, while Russian output in March didn’t see the full 500,000 barrel-a-day reduction announced in February, Romeo noted.
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SACRAMENTO, Calif. — California lawmakers on Monday approved the nation’s first penalty for price gouging at the pump, voting to give regulators the power to punish oil companies for profiting from the type of gas price spikes that plagued the nation’s most populous state last summer.
The Democrats in charge of the state Legislature worked quickly to pass the bill on Monday, just one week after it was introduced. It was an unusually fast process for a controversial issue, especially one opposed by the powerful oil industry that has spent millions of dollars to stop it.
Democratic Gov. Gavin Newsom used his political muscle to pass the bill, which grew out of his call last October for a special legislative session to pass a new tax on oil company profits after the average price of gas in California hit a record high of $6.44 per gallon, according to AAA. Taking on the oil industry has been a major policy priority for Newsom, who is widely viewed as a future presidential candidate.
“When you take on big oil, they usually roll you — that’s exactly what they’ve been doing to consumers for years and years and years,” Newsom told reporters after the vote. “The Legislature had the courage, conviction and the backbone to stand up to big oil.”
He is expected to sign the bill into law Tuesday.
Legislative leaders rejected his initial call for a new tax because they feared it could discourage supply and lead to higher prices.
Instead, Newsom and lawmakers agreed to let the California Energy Commission decide whether to penalize oil companies for price gouging. But the crux of the bill isn’t a potential penalty. Instead, it’s the reams of new information oil companies would be required to disclose to state regulators about their pricing.
The companies would report this information, most of it to be kept confidential, to a new state agency empowered to monitor and investigate the petroleum market and subpoena oil company executives. The commission will rely on the work of this agency, plus a panel of experts, to decide whether to impose a penalty on oil company profits and how much that penalty should be.
“If we force folks to turn over this information, I actually don’t believe we’ll ever need a penalty because the fact that they have to tell us what’s going on will stop them from gouging our consumers,” said Assemblymember Rebecca Bauer-Kahan, a Democrat from Orinda.
California’s gas prices are always higher than the rest of the country because of the state’s taxes and regulations. California has the second-highest gas tax in the country at 54 cents per gallon. And it requires a special blend of gasoline that is better for the environment but more expensive to produce.
But state regulators say those taxes and fees aren’t enough to explain last summer, when the average cost of a gallon of gasoline in California was more than $2.60 higher than the national average.
“There’s truly no other explanation for these historically high prices other than greed,” said Assemblymember Pilar Schiavo, a Democrat from Chatsworth. “The problem is we don’t have the information that we need to prove this, and we don’t have the ability to penalize the kind of historic price gouging we saw last year.”
The oil industry recorded massive profits last year, following years of huge losses during the pandemic when more people stayed home and fewer people were on the road.
Eloy Garcia, lobbyist for the Western States Petroleum Association, said California’s high gas prices are the result of decades of public policy decisions that have made the state an island in the global petroleum market and driven many oil refiners out of the state. He noted California does not have a pipeline to send oil into the state, meaning it has to ship what it can’t produce itself from the ocean, which takes longer and costs more.
“We’re not like Texas. We’re not like Louisiana. We’re not like the Northeast,” Garcia said. “We do not have a fungible fuel supply. We have chosen to do that. We have set ourself up by 30 years of public policy.”
Garcia said Monday’s vote “sends a clear signal not to invest in California.”
Lauren Sanchez, senior climate advisor for Gov. Gavin Newsom, said the state has plenty of supply, noting California oil refineries exported 12% of their product to other states last year.
“We’re also the third-largest gasoline market in the world for these companies,” she said.
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SACRAMENTO, Calif. — California lawmakers on Monday approved the nation’s first penalty for price gouging at the pump, voting to give regulators the power to punish oil companies for profiting from the type of gas price spikes that plagued the nation’s most populous state last summer.
The Democrats in charge of the state Legislature worked quickly to pass the bill on Monday, just one week after it was introduced. It was an unusually fast process for a controversial issue, especially one opposed by the powerful oil industry that has spent millions of dollars to stop it.
Democratic Gov. Gavin Newsom used his political muscle to pass the bill, which grew out of his call last October for a special legislative session to pass a new tax on oil company profits after the average price of gas in California hit a record high of $6.44 per gallon, according to AAA. Taking on the oil industry has been a major policy priority for Newsom, who is widely viewed as a future presidential candidate.
“When you take on big oil, they usually roll you — that’s exactly what they’ve been doing to consumers for years and years and years,” Newsom told reporters after the vote. “The Legislature had the courage, conviction and the backbone to stand up to big oil.”
He is expected to sign the bill into law Tuesday.
Legislative leaders rejected his initial call for a new tax because they feared it could discourage supply and lead to higher prices.
Instead, Newsom and lawmakers agreed to let the California Energy Commission decide whether to penalize oil companies for price gouging. But the crux of the bill isn’t a potential penalty. Instead, it’s the reams of new information oil companies would be required to disclose to state regulators about their pricing.
The companies would report this information, most of it to be kept confidential, to a new state agency empowered to monitor and investigate the petroleum market and subpoena oil company executives. The commission will rely on the work of this agency, plus a panel of experts, to decide whether to impose a penalty on oil company profits and how much that penalty should be.
“If we force folks to turn over this information, I actually don’t believe we’ll ever need a penalty because the fact that they have to tell us what’s going on will stop them from gouging our consumers,” said Assemblymember Rebecca Bauer-Kahan, a Democrat from Orinda.
California’s gas prices are always higher than the rest of the country because of the state’s taxes and regulations. California has the second-highest gas tax in the country at 54 cents per gallon. And it requires a special blend of gasoline that is better for the environment but more expensive to produce.
But state regulators say those taxes and fees aren’t enough to explain last summer, when the average cost of a gallon of gasoline in California was more than $2.60 higher than the national average.
“There’s truly no other explanation for these historically high prices other than greed,” said Assemblymember Pilar Schiavo, a Democrat from Chatsworth. “The problem is we don’t have the information that we need to prove this, and we don’t have the ability to penalize the kind of historic price gouging we saw last year.”
The oil industry recorded massive profits last year, following years of huge losses during the pandemic when more people stayed home and fewer people were on the road.
Eloy Garcia, lobbyist for the Western States Petroleum Association, said California’s high gas prices are the result of decades of public policy decisions that have made the state an island in the global petroleum market and driven many oil refiners out of the state. He noted California does not have a pipeline to send oil into the state, meaning it has to ship what it can’t produce itself from the ocean, which takes longer and costs more.
“We’re not like Texas. We’re not like Louisiana. We’re not like the Northeast,” Garcia said. “We do not have a fungible fuel supply. We have chosen to do that. We have set ourself up by 30 years of public policy.”
Garcia said Monday’s vote “sends a clear signal not to invest in California.”
Lauren Sanchez, senior climate advisor for Gov. Gavin Newsom, said the state has plenty of supply, noting California oil refineries exported 12% of their product to other states last year.
“We’re also the third-largest gasoline market in the world for these companies,” she said.
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DUBAI, United Arab Emirates — Oil giant Saudi Aramco reported Sunday its profits surged to $161 billion last year off higher crude prices, a record result for an energy firm crucial to the kingdom’s economy.
The firm, known formally as the Saudi Arabian Oil Co., said in its annual report that the profit represented “its highest annual profits as a listed company.” That came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and natural gas in Western markets.
Aramco also hopes to increase its production to take advantage of market demand, raising the billions needed to pay for Crown Prince Mohammed bin Salman’s plans to develop futuristic cityscapes to pivot Saudi Arabia away from oil.
However, those plans come despite growing international concerns over the burning of fossil fuels accelerating climate change.
“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices,” Saudi Aramco CEO and President Amin H. Nasser said in a statement.
Profits rose 46.5% when compared to the company’s 2021 results of $110 billion. It earned $49 billion in 2020 when the world faced the worst of the coronavirus pandemic lockdown, travel disruptions and oil prices briefly going negative.
Aramco put its crude production at around 11.5 million barrels a day in 2022 and said it hoped to reach 13 million barrels a day by 2027.
To boost that production, it plans to spend as much as $55 billion this year on capital projects.
Aramco also declared a dividend of $19.5 billion for the fourth quarter of 2022, to be paid in the first quarter of this year.
Benchmark Brent crude oil now trades around $82 a barrel, though prices had reached over $120 a barrel back in June. Aramco, whose fortunes hinge on global energy prices, announced a record $42.4 billion profit in the third quarter of 2022 off the back of that price spike.
Those high prices have further strained ties between the kingdom and the United States, traditionally a security guarantor among the Gulf Arab states amid tensions with Iran. Before the midterm elections in November, the kingdom said the Biden administration sought to delay a decision by OPEC and allies including Russia to cut production that could have kept gasoline prices lower for voters — making public the typically behind-the-scenes negotiations common in the region.
President Joe Biden had warned the kingdom that “there’s going to be some consequences for what they’ve done” in terms of oil prices. However, those consequences have yet to be seen as Saudi Arabia and Iran went to China to strike a diplomatic deal Friday. U.S. gasoline prices now stand on average at $3.47 a gallon, down just about a dollar from last year.
For the kingdom, higher crude oil prices can help fuel the dreams of Prince Mohammed, including his planned $500 billion futuristic desert city project called Neom. However, they also run against the fears of activists over climate change, particularly as the United Nations’ COP28 climate talks will begin this November in the neighboring United Arab Emirates.
Saudi Arabia has pledged to have net-zero carbon emissions by 2060, like China and Russia, though its plans to reach that goal remain unclear. Aramco’s earnings report noted it started a $1.5 billion Sustainability Fund in October and plans a carbon-capture-and-storage facility as well.
Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.
Shares in Aramco stood at $8.74 on Riyadh’s Tadawul stock exchange before it opened Sunday. That’s down from a high of $11.55 a share in the last year. However, that current price still gives Aramco a valuation of $1.9 trillion — making it the world’s second most valuable company behind only Apple. The Saudi government still owns the vast majority of the firm’s shares.
___
Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.
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BANGKOK (AP) — Shares fell Monday in Asia after Wall Street benchmarks closed out their worst week since early December. U.S. futures edged higher while oil prices fell.
Reports on inflation, the jobs market and retail spending have come in hotter than expected, leading analysts to raise forecasts for how high the Federal Reserve will have to take interest rates to slow the U.S. economy and cool inflation.
Higher rates pressure business activity and investment prices. So far, they do not seem to be slowing growth as much as anticipated. The S&P 500 fell 1.1% Friday to cap its third straight loss.
“It is becoming increasingly apparent that inflation, and associated inflation expectations and wage pressures, will not decline in a predictable linear manner,” Mizuho Bank said in a commentary. “Early trading on Monday suggests that risk aversion has been brought forward to Asian markets.”
Tokyo’s Nikkei 225 index
NIK,
edged 0.1% lower to 27,423 and the Kospi
180721,
in Seoul gave up 0.8% to 2,402.
In Hong Kong, the Hang Seng
HSI,
lost 0.5% to 19,907 while the Shanghai Composite index
SHCOMP,
was down 0.2% at 3,259. Australia’s S&P/ASX 200
XJO,
shed 1.1% to 7,224.80.
Bangkok was 0.3% lower while the Sensex in Mumbai dropped 0.7%.
On Friday, the S&P 500
SPX,
closed 1% lower at 3,970.04. The Dow Jones Industrial Average
DJIA,
dropped 1% to 32,816.92, while the Nasdaq Composite
COMP,
lost 1.7% to 11,394.94.
Higher rates can drive down inflation, but they raise the risk of a recession.
The measure of inflation preferred by the Fed, reported Friday, said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate and was higher than economists’ expectations for 4.3%.
It echoed other reports earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.
Other data Friday showed that consumer spending, the biggest piece of the economy, returned to growth in January, rising 1.8% from December. A separate reading on sentiment among consumers came in slightly stronger than earlier thought, while sales of new homes improved a bit more than expected.
Such strength paired with the remarkably resilient job market raises the likelihood the economy might avoid a recession in the near term.
Tech and high-growth stocks once again took the brunt of the pressure.
Investments seen as the most expensive, riskiest or making their investors wait the longest for big growth are among the most vulnerable to higher rates.
Traders are increasing bets on the Fed raising its benchmark rate to at least 5.25% and keeping it that high through the end of the year. It’s currently in a range of 4.50% to 4.75%, and it was at virtually zero a year ago.
Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they climbed further Friday.
The yield on the 10-year Treasury
TMUBMUSD10Y,
was steady at 3.94%, up from 3.89% late Thursday. It helps set rates for mortgages and other important loans. The two-year yield
TMUBMUSD02Y,
which moves more on expectations for the Fed, rose to 4.79% from 4.71% and is near its highest level since 2007.
In other trading Monday, U.S. benchmark crude oil
CL.1,
lost 56 cents to $75.75 per barrel in electronic trading on the New York Mercantile Exchange. It gained 93 cents to $76.32 per barrel. Brent crude oil
BRN00,
the pricing basis for international trading, shed 65 cents to $82.51 per barrel.
The dollar
DXY,
rose to 136.41 Japanese yen
USDJPY,
from 136.45 yen. The euro
EURUSD,
slipped to $1.0533 from $1.0549.
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BRUSSELS — U.S. Treasury Secretary Janet Yellen said Friday that industrialized countries in the Group of Seven are imposing a price cap on refined Russian oil products such as diesel and kerosene, as part of a coalition that includes Australia and a tentative agreement from the European Union.
The cap follows similar price limits put on Russian oil exports, with the goal of reducing the financial resources Russian President Vladimir Putin has to wage the nearly year-long war in Ukraine.
“Today’s agreement builds on the price cap on Russian crude oil exports that we set in December and helps advance our goals of limiting Russia’s key revenue generator in funding its illegal war while promoting stable global energy markets,” Yellen said in a statement.
On Friday, EU governments tentatively agreed to set a $100-per-barrel price cap on sales of Russian diesel to coincide with an EU embargo on the fuel. Diplomats representing the 27 EU governments set the cap on Russian diesel fuel, jet fuel and gasoline ahead of a ban taking effect Sunday. It aims to reduce Russia’s income while keeping its diesel flowing to non-Western countries to avoid a global shortage that would send prices and inflation higher.
Details about the cap were provided by a G-7 statement and diplomats from three different EU member nations, who agreed to discuss the cap on the condition of anonymity.
The $100-per-barrel cap applies to Russian diesel and other fuels that sell for more than the crude oil used to make them. Officials agreed on a $45-per-barrel limit on Russian oil products that sell for less than the price of crude.
The deal follows a similar G-7 agreement to limit the price of Russian crude oil to $60 a barrel. All the price ceilings are enforced by a requirement for the world’s largely Western-based shippers and insurers to abide by sanctions and handle oil products only priced at or below the limits.
Russia has said it will not sell to countries obeying the oil cap, but because its oil is selling for less than $60 per barrel, it has kept flowing to the global market. The price caps encourage non-Western customers that have not banned Russian oil to press for discounts, while outright evasion — though possible — carries additional costs such as organizing off-the-books tankers.
The ambassadors of the 27 EU nations put forward the decision, and national governments have until early Saturday to react with a written objection. No changes to the deal were expected.
Europe has been steadily reducing its diesel supplies from Russia from around half of all imports. Diesel is key for the economy because it is used to power cars, trucks carrying goods, farm equipment and factory machinery. Prices have spiked since Russia invaded Ukraine on rebounding demand and limited refinery capacity in some places.
If the price cap works as intended and Russian diesel keeps flowing, fuel prices should not skyrocket, analysts say. Europe could get alternate supplies of diesel from the U.S., India and the Middle East, while Russia could seek new customers outside Europe.
However, the impact of the cap will be unpredictable as shippers reroute flows of the fuel to new destinations, and longer sea journeys could strain tanker capacity.
Fossil fuel sales are a key pillar of Russia’s budget, but European governments previously hesitated to cut off their purchases because the economy was heavily dependent on Russian natural gas, oil and diesel. Since the start of the war in Ukraine, that has changed.
Europe cut off Russian coal and later banned its crude oil on Dec. 5. Meanwhile, Moscow has halted most supplies of natural gas to Europe, citing technical issues and a refusal by customers to pay in Russian currency. European officials say it is retaliation for sanctions and an attempt to undermine their support for Ukraine.
___
McHugh reported from Frankfurt, Germany. AP writer Josh Boak contributed to this story from Baltimore.
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NEW YORK — Exxon Mobil posted record annual profits in 2022 as Americans struggled with high prices for gasoline, home heating and consumer goods.
The oil giant brought in $12.75 billion in profits in the fourth quarter, bringing annual profits to $55.7 billion. That exceeded Exxon’s previous annual record of $45.22 billion in annual profits Exxon set in 2008, when a barrel of oil soared close to $150.
The Irving, Texas, company brought in $95.43 billion in revenue during the fourth quarter.
Recovering demand and tight energy supplies helped boost profit, the company said.
“While our results clearly benefited from a favorable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight,” said CEO Darren Woods. “We leaned in when others leaned out.”
Exxon achieved its best-ever annual refining throughput in North America and the highest globally since 2012, the company said. It mechanically completed the expansion of its Beaumont Refinery in Texas and expects to bring 250,000 barrels per day of crude oil distillation capacity to the market in first quarter of this year.
Exxon earned $3.09 per share in the quarter. That was lower than the expectations of analysts polled by Factset, who were anticipating $3.29 per share.
The price of oil ranged between $70 to $90 for a barrel of U.S. benchmark crude during the quarter. Domestic natural gas prices, which affect the cost of home energy and electricity, ranged from $6 to $7 per million British thermal units during the quarter, according to FactSet, which was a higher price than most Americans have paid in recent years.
Since Russia invaded Ukraine, Russia’s decreased its supply of natural gas to Europe, which resulted in higher prices of natural gas and its liquid counterpart, LNG, on the global market.
President Joe Biden has accused oil companies of profiting from the war Russia waged on Ukraine, and has previously raised the possibility of a war profit tax on oil companies. Exxon said it incurred $1.3 billion during the quarter associated with European taxes on the energy sector.
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