The oil industry enjoyed record profits in 2022 after Russia invaded Ukraine, but the prices of oil and natural gas have fallen sharply in recent months.
Exxon Mobil and Chevron, the two largest American oil companies, reported relatively modest earnings growth on Friday as they were forced to manage their businesses in the face of sagging prices for oil and natural gas.
The slowing, but still strong, performance followed record earnings in 2022, when Russia’s invasion of Ukraine sent fossil fuel prices soaring through much of the year. By the end of 2022, declining demand for fuels in Europe and Asia helped lower prices. Refineries have continued to perform well, helping Exxon and Chevron strengthen their revenues.
Exxon reported a first-quarter profit of $11.4 billion, compared with $5.95 billion a year earlier. But it was down from the $12.8 billion earned in the fourth quarter of 2022.
Chevron did slightly better, with a profit of nearly $6.6 billion in the first quarter, an improvement over $6.3 billion a year earlier and $6.4 billion in the fourth quarter of 2022.
Darren Woods, Exxon’s chief executive, expressed confidence in the future, though he said the global outlook for energy markets would depend heavily on China’s economic recovery.
“Gasoline demand looks pretty reasonable,” Mr. Woods said. “Jet demand and transportation looks like it’s trending up. Expectations look pretty healthy.”
Demand for gasoline, diesel and other fuels has increased as the world economy has emerged from the pandemic slowdown in 2020 and 2021. But despite higher prices for crude and fuels through much of last year, the two companies have been cautious about investing more to raise production.
Although both companies have increased production over the last two years in the Permian Basin, which straddles Texas and New Mexico, Chevron’s recent output has not met earlier expectations. Both have placed a greater emphasis on returning cash to shareholders by raising dividends and share buybacks.
“While commodity markets remain uncertain, our approach remains unchanged,” said Mike Wirth, Chevron’s chief executive. “Capital and cost discipline applied to advantage assets in both traditional and new energy businesses mean a steady return of cash to shareholders.”
Exxon continues to increase production in deep waters off Guyana and announced this week that it would proceed with a fifth project there, which it expects to produce 250,000 barrels of oil a day beginning in 2026.
Exxon, Chevron and other oil companies emerged from 2022 with record profits, after Russia’s invasion of Ukraine that February pushed crude and natural gas prices higher. But fossil fuel prices have since gradually fallen, despite declines in U.S. oil inventories, because investors are increasingly convinced that the global economy and demand for energy are slowing.
In recent days, the price of oil has dropped below $80 a barrel, after a jump to more than $120 last June. Prices firmed a bit after the Organization of the Petroleum Exporting Countries along with Russia and their allies agreed early this month to cut crude production by 1.2 million barrels a day through the end of the year. Actual cuts have amounted to about half that much, a reduction of less than 1 percent of the global supplies.
Supplies remain robust. Russian oil and gas exports have not declined nearly as much as experts predicted after European countries started buying less of it. That’s because China, India and other developing countries are buying more Russian oil and gas.
Global prices for liquefied natural gas have slumped 45 percent from the beginning of the year. In the United States, regular gasoline prices have dropped roughly 12 percent and diesel prices 14 percent over the last 12 months, according to the AAA motor club. Global demand for oil and L.N.G. are still increasing, but slowly.
The drop in fossil fuel prices is partly a result of unseasonably warm weather in the Northern Hemisphere and particularly Europe this past winter, which reduced demand for natural gas and heating oil. But fears that a global economic slowdown will reduce manufacturing activity have convinced many traders that prices will continue to slide.
There are other reasons that gasoline demand may be weak in the coming years. The International Energy Agency forecast this week that globally, one in five new cars sold this year will be electric, compared with 2 percent four years ago. The organization said sales of battery-powered vehicles would accelerate through the decade in China, the United States and Europe.
Mr. Wirth said that while diesel demand had declined, jet fuel demand had increased. “Gasoline demand is essentially back to prepandemic levels globally,” he said. “In Asia, we see demand coming back as China continues to open up and mobility increases.”
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