The two largest oil companies in the United States reported their lowest first quarter profits in years on Friday. They were supported because of President Trump's economic fallout from the trade war, which weakened consumer confidence and pushed oil prices down.
U.S. crude oil prices fell below $60 per barrel this week. This is a threshold where many companies are unable to drill new wells. Crude is currently around $20 per barrel, cheaper than Trump's inauguration. Not only is there less oil, but businesses are paying more for steel and other materials due to the tariffs imposed by the president.
As a result, there are signs that some companies are already pulling back.
As of last week, the number of wells drilled in the Permian Basin, the nation's largest oilfield, had fallen 3% in a month, according to oilfield service provider Baker Hughes. The company's customers have postponed discretionary costs, and industry-wide spending is likely to decrease this year, a Baker Hughes executive said last week.
Chevron, the second-largest US oil company, said a few months ago that it would cost less in 2025 and that its annual production or capital expenditure forecasts have not changed since. However, the company said it will ease spending on stock buybacks in the second quarter compared to the first three months of the year.
“We are happy where we are,” Eimear Bonner, the company's chief financial officer, said in an interview. “We've navigated the cycle before. We know what to do.”
Financial results reported Friday by Chevron and ExxonMobil, the largest US oil and gas companies, reflect the market before Trump announces the latest tariffs. At about the same time, members of the producer cartel known as OPEC Plus surprised the market by saying that the members would speed up their plans to pump more oil.
Chevron's first quarter profit fell by more than $3.5 billion to a third, causing a loss of analyst expectations. Lower refinement margins also damage revenue.
Even though Exxon's profits for the first three months of the year were $7.7 billion, he was shy about the analyst forecasts collected by Factset. Revenues fell approximately 6% from the previous year.
“In this uncertain market, our shareholders can be confident in knowing that we were built for this,” Darren Woods, CEO of Exxon, said in a statement.
Chevron's stock price fell more than 2% in pre-market trading. The Exxons rose by about 1%.
The problem for many businesses is that oil prices last for a period of less than about $60 per barrel. According to S&P Global Commodity Insights, if they glide to $50, domestic production could drop by about 8% in a year. The United States is the world's largest oil producer.
Joseph Estevez, chief executive of Main Point, a consulting firm specializing in business and supply chain issues, said companies are cutting costs to make U.S. trade policies more clear.
“It's reaching the point where there's no rocks gone, there's no couch cushion,” Estevez said.
Bonner said Chevron has “limited direct impact” from the tariffs. The company is working to reduce the effectiveness by purchasing supplies such as iron locally, she said.
Chevron is facing a May deadline to close work in Venezuela after taking steps to reverse Biden-era policies that allowed Trump to produce more oil in the country. The new rules are already in effect. The company was unable to load oil into the vessels exported due to the license change, Bonner said.
“We continue to be involved with the administration on this topic,” she said.
