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Exxon Mobil’s (XOM) disclosure of factors expected to impact its 2Q25 results highlights softer crude oil and natural gas prices as significant headwinds, driven by increased crude supply from OPEC+’s decision to unwind production cuts. Over the past three months, Brent crude prices have declined by over 10%, averaging around $67 per barrel, reflecting oversupply concerns and weaker global demand signals, exacerbated by OPEC+’s planned output hike. 

Despite these pressures, XOM has partially offset the impact through robust production growth, particularly from its Permian Basin assets, bolstered by the $60 bln acquisition of Pioneer Natural Resources in May 2024. The company’s record Permian output, combined with strong performance in Guyana, has driven a 20% yr/yr increase in net production to 4.6 mln oil-equivalent barrels per day, providing a critical buffer against declining commodity prices.

• In its upstream segment, XOM anticipates a yr/yr earnings decline of $800 mln to $1.2 bln due to lower crude oil prices and a further $300 mln to $700 mln reduction from weaker natural gas prices. These projections reflect the challenging commodity price environment, with U.S. natural gas prices remaining volatile amid high inventories and subdued demand forecasts.
• For 1Q25, upstream non-GAAP earnings rose by $1.1 bln yr/yr to $6.8 bln, despite softer crude realizations, driven by a 767,000 oil-equivalent barrels per day production increase, primarily from the Pioneer acquisition’s contribution to Permian growth. This underscores XOM’s ability to leverage advantaged assets to mitigate price volatility, though the magnitude of 2Q25 price declines may outpace volume gains, pressuring segment profitability.
• The Energy Products segment, encompassing refining and fuels, is expected to see a modest earnings increase of $100 mln to $500 mln yr/yr in 2Q25, driven by improved industry refining margins. In 1Q25, this segment rebounded from a weak 4Q24, with earnings rising $425 mln qtr/qtr to $827 mln, fueled by stronger North American refining margins due to unplanned industry outages and favorable timing effects from derivatives.
• In 2Q25, refining margins continued to improve, supported by persistent supply constraints from maintenance turnarounds and geopolitical disruptions affecting global fuel markets, alongside steady U.S. demand for gasoline and diesel. However, the segment’s upside remains limited compared to the historically high margins of 2023, as new refinery capacity in Asia and Africa gradually comes online, potentially capping further gains.
• XOM’s structural cost savings program has been a critical factor in cushioning the impact of declining oil and gas prices, with cumulative savings reaching $12.7 bln since 2019, including $600 mln in 1Q25 alone. The company remains on track to achieve $18 bln in savings by 2030, outpacing peers and offsetting inflationary pressures and growth-related expenses. These efficiencies, combined with high-return investments in Permian and Guyana, have enhanced earnings resilience.
• However, the company’s adjusted EPS is still projected to decline 16% yr/yr to $6.58 for 2Q25, reflecting the significant drag from commodity prices. With Brent crude potentially facing further downside risk in 2025 due to global demand uncertainties and OPEC+ supply dynamics, XOM’s earnings estimates remain vulnerable.

Softening crude oil and natural gas prices pose a formidable headwind for XOM’s 2Q25 performance, a challenge shared across the oil and gas sector. While rising production from advantaged assets and ongoing structural cost reductions will mitigate these pressures, XOM’s earnings are still expected to contract, underscoring the persistent impact of commodity price volatility.