Exxon Sees Refining Profit Surge On Higher Margins

Key Moments

ExxonMobil expects third-quarter refining earnings to increase by $4.5 billion versus the prior quarter, supported by stronger margins.
Adjusted refining net income is projected at $8.5 billion, more than double the previous quarter’s level, according to an analyst note.
Upstream earnings are projected to decline by $1.3 billion, while upstream asset divestments are set to add $700 million to profit.

Refining Margins Drive Large Downstream Earnings Upside

ExxonMobil signaled on Friday that a substantial improvement in refining margins during the third quarter is likely to lift downstream profit by $4.5 billion compared with the second quarter.

Refining margins have risen sharply amid the ongoing Iran war, which has restricted energy exports through the Strait of Hormuz, and Ukrainian strikes on Russian refineries. Those disruptions have pushed fuel prices higher and created political challenges for the administration of US President Donald Trump ahead of the November midterm elections.

The anticipated surge in refining profitability at the largest US oil company could heighten tensions with the White House. In August, President Trump criticized Exxon and Chevron, saying they were making “too much money”.

Earnings Preview: Segment Impacts

In a regulatory filing, Exxon indicated that third-quarter adjusted net income from its refining operations could reach $8.5 billion, according to a research note from BMO Capital Markets analyst Phillip Jungwirth. That figure would represent more than a twofold increase from the prior quarter.

Item	Impact vs. Q2	Detail
Refining (Downstream) earnings	+ $4.5 billion	Driven by stronger refining margins
Adjusted refining net income	–	Could reach $8.5 billion, more than double last quarter
Upstream earnings	– $1.3 billion	Weaker compared with the second quarter
Upstream divestments	+ $700 million	Proceeds from asset sales expected to lift earnings

Operational and Market Dynamics

Exxon noted that upstream earnings could decline by $1.3 billion in the third quarter relative to the second quarter. The company referenced an approximately 5.6% drop in the average closing Brent benchmark price during the period compared with the previous three months, based on LSEG data.

Despite the Iran war, Exxon indicated that there were no volume-related disruptions to its operations during the quarter.

At the same time, the company expects its strategy to divest selected upstream assets to contribute $700 million to earnings.