Oil firms suffer in second quarter

17/07/2009

Oil majors are likely to have experienced an "ugly" second quarter as they are hit by the dual effects of falling demand and tightened profitability.

Such is the claim of Fred Dickson, market strategist at D.A. Davidson & Co, who has told Reuters that if sector area is going to seriously underperform in upcoming earnings reports, it will be the oil and gas industry.

Oil companies have been particularly hard hit by shrinking refining margins, with profits on converting crude into products such as heating oil, DERV and gasoline plummeting as wholesale prices for commodities have crumbled.

According to Reuters estimates, Exxon Mobil, the world's second largest company by market capitalisation after Sinopec, is expected to announce a 59 per cent drop in net income for the second quarter as it counts the cost of such pressures.

Exxon and other supermajors enjoyed record profits in 2008 as oil prices surged to an all-time high in the first seven months of the year.