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[NEW YORK] US oil giants ExxonMobil and Chevron reported another bruising round of results Friday, with a glut of gasoline and other refined products adding to the hit from low oil prices.
ExxonMobil reported a nearly 60 per cent plunge in second-quarter net income to US$1.7 billion, while Chevron suffered a US$1.5 billion loss, its third straight quarter in the red.
"The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world," Chevron chief executive John Watson said.
The earnings reports showed the ongoing effects of the oil-price bust, which has forced oil companies to sell the crude they extract from the ground at lower prices than during the same period a year ago.
During the second quarter, oil companies also suffered big declines in their profits from the refining business, which has sometimes provided a source of earnings strength during a two-year slump in crude prices.
Refining entails processing crude oil into gasoline and other petroleum products. That means low oil prices can lead to higher profits in the business if demand stays strong.
Although demand in the United States has been strong this summer, refining margins have dwindled anyway due to excess supply, analysts say.
Whether conditions have reached "peak bad" is an overarching industry debate, a Morgan Stanley report said this week.
At ExxonMobil, refining profits in the second quarter fell 45.2 per cent to US$825 million, while Chevron's refining profits fell 56.8 per cent to US$1.3 billion.
The US driving-fuels market has "near-perfect demand conditions," but gasoline profit margins have been worn down by persistent oversupply, a July 19 report by UniCredit said.
Supplies are also lofty in the Amsterdam-Rotterdam-Antwerp market, while gasoline stocks in Singapore remain "stubbornly high," it added.
Joe Gorder, chief executive at Valero Energy, a large US refining company, predicted refiners would reduce capacity in the third and fourth quarter in the north-eastern United States and Northwest Europe.
"We're going to need some rebalancing in the markets," he told analysts on a conference call Tuesday.
Oil companies have also sharply cut capital spending in response to the industry slump, and some companies have also laid off staff and trimmed their dividends.
The glut in gasoline supplies has dimmed the outlook for the overall oil market, providing a major factor in the retreat in US oil prices from above US$50 a barrel in early June to a near three-month low of US$41.14 a barrel on Thursday.
Goldman Sachs predicted in a note this week that oil prices would linger in the US$45 to US$50 a barrel range through mid-2017 with risks "skewed to the downside," saying an improvement in supply-demand fundamentals "remains fragile."
Shares of ExxonMobil fell 2.4 per cent to 88.07 in late-morning trade, while Chevron slipped 0.3 per cent to USUS$101.52.