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Energy Majors Face Profitability Challenges Amidst Plummeting Prices in Q2 2023

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In the second quarter of 2023, several energy majors, including Shell and TotalEnergies, reported weaker financial profitability due to a significant decline in energy prices. Both companies witnessed substantial drops in second-quarter profits after recording record earnings in 2022, as oil and gas prices, refining margins, and trading results all experienced a downturn. This shift in fortunes came after oil and gas prices surged last year following Russia’s invasion of Ukraine, but this year, they substantially decreased as concerns about a supply deficit eased amidst global economic challenges.

Shell’s earnings for the three months ending in June amounted to $5.073 billion after deducting non-recurring items, a decline compared to the previous quarter and the second quarter of 2022 when fossil fuel prices reached all-time highs due to supply disruptions caused by the invasion in February that year. Similarly, TotalEnergies reported $4.956 billion in adjusted net income, which was also lower than the previous quarter and the previous year. Despite these challenges, Shell’s CEO, Wael Sawan, expressed pride in the company’s “strong operational performance… despite a lower commodity price environment,” while TotalEnergies’ CEO, Patrick Pouyanne, acknowledged the “softening oil and gas environment” during the quarter.

Joining the trend, Spain’s Repsol recently reported a dip in profitability, closely followed by Norway’s state-owned energy company, Equinor. Chevron Corp. had previously projected a drop in income from January to March 2023 compared to April to June 2022. Despite the decrease in revenues, it is worth noting that profits for global oil conglomerates remained higher than pre-conflict levels.

Sanctions imposed to isolate Russia, a member of the Organization of Petroleum Exporting Countries Plus (OPEC+), and the European Union’s primary source of petroleum and gas before the war, have impacted some producers with reduced volumes. Nevertheless, oil and gas prices continue to remain higher than before the conflict.

Benchmark Brent crude prices averaged $80 per barrel in the second quarter of 2023, down from $110 the previous year. Liquefied natural gas (LNG) prices also saw a significant fall, dropping from approximately $33 to $11.75 per million British thermal units (mmBtu). TotalEnergies predicts that average LNG prices will remain between $9 and $10 mmBtu in the third quarter but will surge to $15 mmBtu over the winter due to Asian and European demand. The energy landscape remains ever-changing, presenting companies with challenging market conditions to navigate.

To succeed in this dynamic environment, industry players must prioritize adaptability and innovation. The oil industry, in particular, is witnessing substantial price fluctuations, which can potentially impact AGO prices. Though the precise extent of these effects is uncertain, we maintain a vigilant and proactive approach, closely monitoring market trends. As we move forward, staying attuned to these developments will be crucial for thriving in this evolving market.

Source:  Oriental News, Ringzone, Legit

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