Investors short Exxon & Chevron shares on Q3 print

Today’s headlines

What’s happening: Oil giants ExxonMobil and Chevron released earnings results for the latest quarter on Friday.

What happened: Both ExxonMobil and Chevron reported a sharp decline in sales and earnings compared to the same quarter last year.

The two oil giants had recently announced some mega acquisition deals to meet global energy needs.

How were the results: The two largest US oil giants missed market expectations on earnings:

• Exxon’s revenues declined by around 19% to $90.76 billion, missing Wall Street expectations of $93.41 billion.
• Exxon’s adjusted earnings came in at $2.27 per share, short of the consensus estimates of $2.37 per share.
• Chevron’s revenues also contracted by about 19% to $54.08 billion but came in slightly better than the consensus estimates of $53 billion.
• Chevron’s earnings fell sharply to $3.05 per share, missing market expectations of $3.33 per share.

Why it matters: Exxon recently announced a deal to acquire Pioneer Natural Resources for nearly $60 billion in an all-stock deal. The company had acquired Denbury in an all-stock transaction in the previous quarter.

Chevron announced an agreement to acquire Hess in a $53 billion all-stock agreement. Chevron also announced the completion of its acquisition of PDC Energy during the latest quarter.

Although both oil companies recorded a sharp decline in sales and earning compared to the same quarter last year, they notched growth on a quarter-over-quarter basis. Last year, oil companies had reported outsized earnings due to soaring oil and gas prices after Russia’s invasion of Ukraine.

Exxon’s profits from the upstream production segment climbed 34% from the previous quarter. US production profits surged by 69%, while non-US production profits grew by 25% versus the previous quarter.

“We delivered another quarter of strong operational performance, earnings and cash flows, adding nearly 80,000 net oil-equivalent barrels per day to support global supply,” ExxonMobil CEO Darren Woods said.

Chevron also benefited by higher margins at its refinery operations. However, its upstream production segment recorded merely 17% growth in earnings versus the second quarter.

How shares responded: ExxonMobil’s shares fell 1.9% to close at $105.55 on Friday, while Chevron shares tumbled 6.7% to settle at $144.35.

What to watch: Investors will monitor geopolitical unrest as any rise in oil prices will benefit both companies. Markets will also watch global economic growth, for signs of meaningful improvement in energy demand.

The markets today

The British pound will be in focus today ahead of the Bank of England’s rate decision

Context: The GBP/USD forex pair moved slightly lower on Friday and ended the week in the red.

Details: With no major domestic news from the UK, the sterling made moves depending on the global news flows. Rising geopolitical unrest weighed heavily on the British pound.

Strength in the US dollar also exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major pairs, closed almost flat at 106.58 on Friday.

The GBP/USD forex pair fell around 0.1% to 1.2120 on Friday, recording a weekly loss of around 0.4%. The British currency is also on course to ending the month with a loss of around 0.7%, trading close to a six-month low of 1.2039 recorded earlier in October.

The European Central Bank held interest rates at its meeting last week, which exerted pressure on the EUR/GBP pair. However, the forex pair recovered slightly on Friday, gaining around 0.07% to reach 87.16.

What to watch: Investors await the Bank of England’s interest rate decision this week. The British central bank is widely expected to keep its rates unchanged at 5.25% at its latest meeting.

Other Markets: US trading indices closed mixed on Friday, with the Dow Jones index and S&P 500 down by 1.12% and 0.48%, respectively, and the Nasdaq 100 up by 0.50%.

The news shaping the markets

Even while countries prepare to attend the two-day peace summit in Ukraine, leaders believe Russia and Ukraine are locked in a stalemate. The news sent the safe-haven US dollar index slightly higher this morning.

Australia’s retail sales grew by 0.9% in September, accelerating from 0.3% in August, which lent support to the AUD/USD forex pair.

Qatar’s trade surplus fell by 36.1% year-over-year to QR 19.9 billion in September, sending the AQR/USD pair slightly lower in forex trading this morning.

Vietnam’s trade surplus widened to $3 billion in October, from $2.47 billion in the year-ago month. Exporting growing more than imports lent support to the VND/USD forex pair.

Russia’s central bank increased its key interest rate by 200bps to 15% at its latest meeting. Despite this, the RUB/USD pair declined in forex trading this morning.

What else to watch today

South Africa’s money supply M3, private sector credit, Turkey’s economic confidence index, Spain’s consumer price index and industry confidence indicator, Germany’s GDP growth rate and consumer price inflation rate, UK’s consumer credit, mortgage approvals, mortgage lending, money supply M4 and net lending to individuals, Eurozone’s economic sentiment indicator, consumer confidence indicator, consumer confidence price trends, industry confidence indicator, selling price expectations and services confidence indicator, Brazil’s IGP-M inflation, gross debt to GDP, government budget value, net payrolls and BCB focus market readout, US Dallas Fed manufacturing index, as well as Mexico’s government budget value.