- The largest international oil companies are increasing their production levels, with U.S. supermajors achieving unprecedented output.
- On Sunday, OPEC+ revealed that it would postpone the anticipated commencement of the reduction in production cuts from December 1, 2024, to January 1, 2025.
- The increased output from oil majors may complicate OPEC+’s efforts to manage supply effectively.
The prominent entities within the petroleum sector, encompassing ExxonMobil, Chevron, Shell, BP, and TotalEnergies, have disclosed an augmentation in their oil and gas production for the third quarter in comparison to the preceding year.
These organizations are prioritizing the expansion of their cost-effective, high-value assets to cater to the global energy requirements. Furthermore, European oil majors have redirected their investments from renewable energy sources back to conventional oil and gas operations.
The increase in hydrocarbon production has enabled many of these companies to report better-than-expected earnings for the third quarter, despite lower oil and gas prices relative to last year and a downturn in downstream operations characterized by declining refining margins.
While Big Oil has ramped up production, this has contributed to a rise in global supply, complicating OPEC+’s attempts to manage oil output and stabilize prices. The increase in production from non-OPEC+ sources has raised concerns about the growth of global oil demand, which has negatively impacted oil prices in recent months.
On Sunday, OPEC+ announced a postponement of the planned easing of production cuts from December 1, 2024, to January 1, 2025.
This decision was anticipated, as the group had previously linked a December supply increase of 180,000 barrels per day to prevailing market conditions. With just a month remaining before the scheduled reversal of production cuts, OPEC+ determined that the market was not conducive to increasing supply.
The cartel has recognized that global oil demand growth has been weaker than initially projected earlier this year. Concurrently, non-OPEC+ supply has been on the rise, particularly from the United States, Guyana, and Brazil—regions where Big Oil is concentrating on developing advantageous assets.
Major Oil Companies Increase Output
The largest oil firms in the U.S. and Europe have seen production increases that have mitigated the impact of declining prices and sluggish refining activities. American supermajors are achieving unprecedented production levels from the Permian Basin, allowing them to surpass analyst forecasts for the third quarter.
On Friday, Exxon announced third-quarter earnings that exceeded expectations, with liquid production reaching a 40-year peak, compensating for lower oil and gas prices and weak refining margins. This performance was bolstered by significant production growth from both Guyana and Permian assets, including contributions from Pioneer assets during the first full quarter following the merger. Exxon reported its highest liquid volumes in four decades for Q3 2024, with output rising 24% year-over-year to 4.6 million oil-equivalent barrels per day.
“We achieved a record production level in the Permian of over 1.4 million oil-equivalent barrels during the third quarter,” stated Kathryn Mikells, ExxonMobil’s chief financial officer, during the earnings call.
Additionally, advancements in efficiency and technology have enabled Exxon to double its profit per oil-equivalent barrel on a constant price basis, increasing from $5 per barrel in 2019 to $10 per barrel year-to-date in 2024, excluding Pioneer, Mikells noted.
Chevron, another major U.S. oil company, also reported earnings last week that surpassed consensus estimates for the third quarter, driven by record production levels in the U.S. and from Permian oil and gas operations.
Chevron's total worldwide net oil-equivalent production increased by 7% compared to the previous year, largely due to record output in the Permian Basin and the acquisition and integration of PDC Energy.
U.S. net oil-equivalent production rose by 198,000 barrels per day from a year earlier, setting a new quarterly record, attributed to peak production in the Permian Basin and the PDC acquisition, according to Chevron.
The company's leadership highlighted during the earnings call that its annual capital expenditure (capex) has decreased to approximately $18 billion, which is less than half of the $40 billion spent a decade ago.
"We are operating in a significantly more capital-efficient way than ever before," stated CEO Mike Wirth.
In a discussion with Bloomberg, Wirth remarked, "We are enhancing our efficiency across all operations," adding, "We are achieving more with every dollar we invest."
While U.S. Big Oil made headlines with record production figures in the third quarter, European majors—excluding TotalEnergies—also increased their oil and gas output.
Shell reported an increase in liquids and LNG production, and despite lower crude oil prices and refining margins in Q3, its earnings exceeded expectations, reflecting robust operational performance in Integrated Gas, Upstream, and Marketing, according to the supermajor.
During the earnings call, CEO Wael Sawan emphasized Shell's commitment to its core business, stating, "We believe that oil and gas will play a vital role in the energy transition for the foreseeable future."
Similarly, BP, another UK-based supermajor, reported third-quarter earnings that surpassed analyst predictions, although profits were lower compared to the previous year and the second quarter due to declining oil prices and reduced refining margins. Year-to-date, BP's upstream production has increased by approximately 3%, with liquids production rising by 5%.
"We have made substantial strides since outlining our six priorities earlier this year to simplify bp, enhance focus, and increase value. In the oil and gas sector, we see opportunities for growth throughout the decade, prioritizing value over volume," stated CEO Murray Auchincloss.
The supermajors are now aiming to enhance lower-cost, lower-emission production, which could potentially disrupt OPEC+’s supply management strategies.