Almost three years ago, Russia’s invasion of Ukraine wiped out Europe’s biggest gas source, sending shockwaves through global energy markets and sending fossil fuel producers poised to profit from the volatility into higher-than-expected returns. It set the stage for quarter after quarter. Now those returns are starting to cool.
But as the market simmers, oil executives warn that profits are also simmering. A glut of new oil and gas projects excited by the Prosil fuels agenda from the White House could mean future markets are weak as well.
Shell, Europe’s biggest oil company, is widely expected to deliver a weaker profit when it reveals its full-year financial results this week. The world’s largest trader of liquefied natural gas (LNG) warned shareholders earlier this month that oil and gas trading results for the final quarter of last year were likely to be significantly lower than the previous three months.
Shell’s adjusted annual profits could top $24bn (£19bn) last year, according to the consensus view of City analysts. This represents a decline from 2023, when full-year revenue fell to $28.25 billion from a record high of nearly $400 billion the year Russia’s war began.
Exxonmobil, the largest U.S. oil company, is expected to report weaker profits in its annual results this week. Oil supermajor, which reported record $560 billion in profits in 2022, told investors this month that it expects oil refining profits and weaknesses to decline sharply across all its businesses.
The country has adapted to the loss of Russian pipeline supplies by relying more on sea imports from the US and the Middle East
Even with Trump’s numerous measures to support the fossil fuel sector, it is unclear whether oil companies can expect to benefit from the profits provided by the Kremlin’s war machine. Within days of taking office, the 47th president called on the OPEC oil cartel to further lower global oil prices by pumping more crude oil. Trump claimed this could end the war in Ukraine – perhaps by examining revenues from Russian oil companies, which he accused producers of prolonging the conflict by keeping prices high.
Trump, who wants more crude production from Saudi Arabia and his push for more crude production from US oil companies to “drill” “baby drills,” his bid to ease costs for households. can deliver on his promises, but it will do little to help the oil companies who donated millions to his presidential campaign. to an analyst. The recent profit warnings from Exxon and Shell emerge in large part due to weakness in the oil and gas market, which shows little sign of structural recovery in the near term.
The US benchmark price, known as the Henry Hub, averaged $2.57 a British Thermal Unit (MMBTU) in 2023, down from an average of about $62 in 2022, when the gas market surged after Russia’s full-scale incursion into Ukraine. % decreased. In 2024, gas prices further declined to an average of $2.33/mmbtu.
It’s a similar story for the oil market. The international benchmark Brent crude oil averaged over $100 in 2022, dropping to $82.60 in 2023 due to the outbreak of war in 2022. $74.40 for the last quarter.
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In part, the steady decline in fossil fuel prices is driving a “new energy normal” across Europe, which is adapting to the loss of Russian pipeline gas and oil supplies by relying on seaborne imports from the United States and the Middle East. is reflected.
But the drop in oil and gas prices points to deeper questions about the world’s future appetite for fossil fuels and the relentless growth of new projects to protect it. The International Energy Agency has made two things clear. First, no new fossil fuel projects align with global climate goals. Second, a surge in new oil and LNG projects will outstrip demand starting this year, leading to lower market prices for the rest of the decade.
“Trump’s push for lower oil prices makes him think the U.S. oil industry is worth less to Putin and Mohammed bin Salman than he thought,” said SEB’s Commodity Analyst. said one Bjarne Schieldrop. “Is he with the American consumer and supports lower oil and gasoline prices, or is he siding with the rich oil lobby who want to control supply and keep oil prices at healthy levels? Do you have it?”
