Why Big Oil's Profits Keep Flowing Despite Low Oil Prices: A Deep Dive
The oil market's volatility over the past few weeks, driven by geopolitical tensions and a fragile ceasefire, has left oil prices well below their recent highs. This has significantly impacted the bottom lines of oil and gas companies, with the energy sector reporting a meager 0.5% earnings growth in Q3, far below the market average of 13.1%. However, the story of Big Oil companies is a different one. Despite low oil prices, these giants have defied expectations, cutting production less than anticipated and continuing to ramp up output, thus offsetting some of the price decline.
Take Exxon Mobil (NYSE: XOM) for instance. While their Q3 earnings of $7.54 billion were 12.4% lower than the previous year, revenue of $5.3 billion still represented a 5.3% year-over-year decline. This is a remarkable feat, considering the overall decline in oil prices. The company's cumulative cost savings since 2019 now exceed $14 billion, with a target of over $18 billion by 2030. This is achieved through automation, supply chain optimization, and operational technology improvements, making Exxon's earnings breakeven point significantly lower than it was five years ago. Exxon's portfolio-weighted breakeven is now estimated at $40-42 per barrel, ensuring healthy margins even at current prices.
Exxon's increased hydrocarbons production to 4.7 million oil-equivalent barrels per day, including significant contributions from the Permian and Guyana, further underscores their resilience. The Yellowtail project, brought online in Q3, is expected to boost Guyana's output to over 900,000 boe/d, four months ahead of schedule.
Chevron, the second-largest U.S. oil company, also posted impressive numbers. Despite a 21% year-over-year increase in global production to 4.09 million boe/d, including a 27% Y/Y rise in U.S. production to a record 2.04 million boe/d, Chevron's net profit fell to $3.54 billion in Q3 2025 from $4.49 billion in Q3 2024. However, revenues were only slightly lower at $48.17 billion from $48.93 billion a year ago, with increased production helping to offset lower crude prices.
The key to Big Oil's success lies in their ability to leverage volatile oil markets. European oil majors like Shell, the world's largest oil trader, have capitalized on recent sanctions on Russian energy giants by capturing significant spreads in regional markets. Shell's trading division posted 'significantly higher optimization results' last term, generating an estimated $1 billion annually from U.S. crude trading, a substantial portion of its U.S. pre-tax profits. TotalEnergies' integrated power and gas trading segment also generated $800 million in profits in Q3, a 10% increase from Q2.
Exxon and Chevron, while engaging in oil trading, have traditionally adopted a more risk-averse approach, focusing on logistics and balancing their integrated systems rather than speculative profits. However, the industry's new operating strategy emphasizes cost discipline and returning cash to shareholders. ExxonMobil returned $4.2 billion in dividends and $5.1 billion in share buybacks in Q3, while Shell has announced buybacks exceeding $3 billion for 16 straight quarters, and Chevron and TotalEnergies distributed $6 billion and $4.5 billion, respectively.
In conclusion, despite low oil prices, Big Oil companies have demonstrated remarkable resilience through cost savings, increased production, and strategic trading activities. Their ability to navigate volatile markets and focus on cost discipline positions them to continue generating profits, even in challenging environments.
