Shell and ExxonMobil Warn of Weaker Profits Amid Declining Oil and Gas Prices

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Major oil companies, including Shell and ExxonMobil, are poised to announce disappointing earnings this week, signaling a significant shift in the energy market. Following the volatility created by Russia's invasion of Ukraine, which disrupted Europe's primary gas supply, both companies are now anticipating reduced profits due to oversupply and weakening demand.

Shell is expected to report annual profits of just over $24 billion for 2024, markedly down from nearly $28.25 billion in 2023 and a record high of almost $40 billion in 2022. The world's largest liquefied natural gas trader recently warned shareholders that its trading results for the last quarter of the previous year would likely fall substantially compared to earlier quarters.

ExxonMobil, the largest oil company in the United States, is also forecasted to announce lower annual profits. It previously recorded a staggering $56 billion in profits in 2022, but it now expects to report declines across its business segments.

The declining prices of oil and gas are a reflection of changing market dynamics. The average U.S. gas benchmark price experienced a dramatic 62% drop in 2023 compared to the previous year, and oil prices have followed a similar trajectory, falling from over $100 a barrel in 2022 to approximately $74.40 in the final quarter of 2024.

As European countries adapt to the loss of Russian supplies by increasing reliance on imports from the U.S. and the Middle East, deeper questions remain about the future demand for fossil fuels. Analysts warn that the surge in new oil and gas projects could potentially exceed demand, leading to sustained lower prices in the coming years.

The issue is further complicated by political factors, including recent calls by former President Donald Trump for increased oil production to lower prices domestically. While perceived as beneficial for consumers, analysts express uncertainty about how this will affect the oil industry's profit margins, given ongoing market challenges.

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