Exxon Profits Down 46% on 118 Oil|Why Big Oil Cant Cash In

A Market Holding Its Breath — And a Number That Doesn't Add Up

Brent crude opened 2026 at $61 a barrel. It closed the first quarter at $118. That is the largest inflation-adjusted quarterly price increase recorded since the EIA began tracking data in 1988. And yet, on the same day those numbers were confirmed, Exxon Mobil reported that its quarterly earnings had fallen to $4.2 billion — down from $7.7 billion in the same quarter last year. That is a 46% drop. Chevron's profits fell 37%, to $2.2 billion from $3.5 billion.

Both companies beat Wall Street expectations. That is the detail most headlines led with. The detail they buried is that the biggest oil price surge in living memory produced a historic earnings collapse in the same quarter.

The backdrop on Friday was already tense. The FTSE 100 closed down in thin holiday trading, weighed by losses in energy stocks and AstraZeneca. NatWest results added pressure. Across the Atlantic, Trump announced he was tearing up part of the EU tariff deal struck last summer — raising import duties on European cars from 15% to 25%, effective next week, blindsiding Brussels on a public holiday. Meanwhile, jet fuel is now trading at $1,500 per metric ton, more than twice pre-war levels, and the Strait of Hormuz blockade has removed roughly 9 million barrels per day from global supply. Spirit Airlines is preparing to cease operations. The UK's own manufacturing PMI hit a 47-month high of 53.7 in April — a figure analysts called "remarkably" positive given the war — but business optimism fell. Everyone can read the contradiction.

The question nobody is cleanly answering: if oil at $118 is supposed to be a windfall for the majors, why are the majors reporting the worst quarterly earnings in years?

The War That Raised Prices and Destroyed Margins

The standard logic is simple: higher oil prices lift upstream revenues. Exxon's own April filing told investors that changes in liquids prices could lift first-quarter earnings by $1.9 billion. That tailwind was real. It was just overwhelmed by something else.

The Iran conflict and the Strait of Hormuz blockade have removed supply — but they have also strangled delivery. Tanker routes that used to carry Middle East crude directly to Asian and European refiners are now rerouted around the Cape of Good Hope or held in limbo. Exxon and Chevron's downstream and chemicals businesses, which refine and sell products, depend on throughput — steady volumes at predictable prices. What they got instead was stalled deliveries, surge costs in alternative logistics, and a commodity price so high that industrial demand in key markets began to crack.

Exxon's earnings fell because its refining margins compressed even as crude rose. The company sells refined products — gasoline, jet fuel, petrochemicals — and when crude input costs jump faster than product prices can absorb, margins invert. Chevron faced similar dynamics, compounded by company-specific cash-flow headwinds the company had flagged in April.

Here is where it breaks from the script: both companies are also defying Trump administration pressure to boost US production. The White House economic adviser Kevin Hassett said Thursday the administration is "in constant communication with oil companies" and studying regulatory changes to accelerate output. Exxon and Chevron have not moved. Their argument is that drilling into a supply shock takes 18 to 24 months to affect actual output, and that expanding capital expenditure into a structurally uncertain market — one shaped by a war that could end tomorrow — is not sound economics. The KBRA Q2 credit outlook for Europe frames the same bind: the Iran shock has so far been more contained than 2022's energy crisis, but stagflation risk is rising, and the policy tools available are limited.

The reflex in 2022 was different. When Russia's invasion of Ukraine drove Brent above $120, the majors posted record profits because their existing production suddenly commanded premium prices in a market where European buyers were scrambling for alternatives. That supply shock was a rerouting problem. This one is a volume problem. Nine million barrels per day are simply not moving. There is no rerouting around zero.

What Has to Happen Next — and What Would Break It

The most important line in the Exxon and Chevron reporting is not the earnings number. It is the production guidance. Both companies held capital expenditure plans steady rather than accelerating them. That is a signal: the majors do not believe $118 oil is structurally durable. They are pricing in either a resolution at the Strait or a demand collapse — and either outcome compresses the oil price before new wells can be brought online.

The KBRA report flags the same scenario from the credit side: European credit markets remain supported by resilient corporate performance and low defaults, but "rising commodity prices, weaker sentiment, and elevated inflation expectations are increasing stagflation risks." The Bank of England this week warned food inflation could reach 7% by year end. That is not an energy story — it is a fertiliser, logistics, and input cost story that runs through the same supply chains the Strait disruption has fractured.

Based on current evidence, the balance leans toward continued margin pressure for integrated oil majors, even if crude prices hold above $100. The mechanism that would reverse this is not a higher oil price — it is restored throughput. Specifically: if the Trump administration's proposed Maritime Freedom Construct succeeds in reopening the Strait to commercial traffic, and tanker deliveries normalise, Exxon and Chevron's downstream businesses start recovering margin within one to two quarters. That is the recovery scenario.

The scenario that makes things worse is a prolonged blockade combined with an economic slowdown in Europe and Asia that kills demand even as supply remains constrained. In that case, oil prices could plateau or fall while input and logistics costs remain elevated — the worst margin environment possible for integrated majors, and a deeper stagflation problem for the UK.

The benchmark to watch is not the crude price. It is tanker voyage counts through alternative routes versus the Strait's pre-war baseline. If rerouting volumes plateau without Strait reopening, the refining margin story for Q2 will look worse, not better. Exxon and Chevron beat expectations in Q1 partly because expectations were already reset low. The question for Q2 is whether the reset is now the floor — or just the beginning.