Cash-rich oil majors face post-Iran strategy rethink: Bousso
XLE•The five largest Western oil companies are expected to report combined third-quarter profits of about $53 billion, up from $48 billion in the second quarter. The columnist argues that the majors need to deploy cash toward growth as the Iran conflict reshapes energy markets.
1. Profits and investment
BP, Chevron, Exxon Mobil, Shell and TotalEnergies are expected to earn about $53 billion combined in the third quarter, according to RBC Capital Markets estimates, compared with $48 billion in the second quarter and more than double year-earlier levels. Their combined debt is set to fall to $150 billion from $200 billion in the first quarter, according to LSEG estimates, as companies have directed billions toward debt reduction rather than major new investments.
2. Refining and supply
Record refining margins have driven the earnings surge: benchmark U.S. crack spreads have averaged about $63 per barrel this quarter, versus $50 in the second quarter and $26 a year earlier. The columnist says the crisis could make new refining capacity in Asia and Africa more attractive, while buyers’ focus on reliable supplies strengthens the case for investment in regions including the Atlantic Basin, Africa and Asia.
3. Longer trade routes
Asian buyers’ shift toward crude oil and liquefied natural gas from the Atlantic Basin has more than doubled voyage times compared with traditional Middle Eastern routes and pushed tanker rates to record highs. The columnist says longer supply chains could support greater investment in tankers, storage and trading infrastructure, and argues that oil majors will need a clearer plan for deploying their cash.
