Big Oil's Q2 Outlook: Downstream Gains and Upstream Pains

Core Insights - The upcoming earnings reports for major oil and energy companies will reveal contrasting performance between upstream and downstream segments, with upstream likely facing lower profits due to falling oil and gas prices, while downstream operations, particularly refining, may show resilience and strength [1] ExxonMobil - ExxonMobil anticipates a significant decline in second-quarter earnings, projecting a drop of up to $1.9 billion in upstream earnings primarily due to lower oil prices impacting earnings by $1.2 billion and natural gas prices by $700 million [2][3] - The refining and chemical segments may provide a modest boost, with potential refining profits estimated to add between $100 million and $500 million, although maintenance work could limit these gains [3] BP - BP expects to increase oil and gas production beyond initial forecasts, driven by enhanced output from U.S. shale operations, but anticipates a hit of about $800 million to drilling profits due to lower crude oil prices [4][5] - The refining segment is projected to see profits rise from $15.20 per barrel in Q1 to $21.10 per barrel in Q2, potentially adding $300 million to $500 million to downstream profits [5] Shell - Shell is facing challenges with expected declines in traditional drilling production due to maintenance and asset sales, while its Integrated Gas division's production is projected to be stable [6][8] - Refining margins are expected to improve from $6.20 per barrel in Q1 to $8.90 per barrel in Q2, which may help offset weaker results from LNG and drilling operations [7][8] Industry Outlook - The refining sector within the energy industry is demonstrating notable strength, with companies like ExxonMobil, BP, and Shell benefiting from better profits from refining crude oil into fuels and other products [9] - Global oil demand remains steady, supported by summer travel and increased electricity consumption, while natural gas demand in the U.S. is also strengthening, setting the stage for potential price recovery in the latter half of 2025 [10]