Why Oil Prices Are Resilient – But Big Oil Isn’t | Shale Magazine

Summary: 

• OPEC+ bolsters production by 548,000 BPD in August, yet global oil prices remain buoyant, defying typical demand expectations.
• ExxonMobil forecast a Q2 earnings drop of up to $1.9 billion, underlining growing pressure from weaker margins, softer liquids pricing, and rising operational costs.
• Despite resilient prices, upstream inflation and downstream weakness expose a delicate balance between supply confidence and profits vulnerability, looking ahead to Q3. 

When More Oil Production Doesn’t Mean Cheaper Oil

In early July, the Organization of the Petroleum Exporting Countries and Allies (OPEC+) announced that it would increase production by 548,000 b/d in August 2025. This increase is larger than expected and marks the fourth consecutive month of additional output from the organization. 

Despite the increase in output, West Texas Immediate crude prices increased slightly to $67.93 per barrel on Monday, July 7th, due to continued geopolitical risks. With ongoing conflicts in the Middle East, the war between Russia and Ukraine, and other global factors, oil prices have not dropped, defying expectations of a return to normal demand. 

In a typical cycle, additional output leads to lower oil prices and vice versa. However, the market is receiving mixed signals this summer with conflicting supply and demand observations. 

Instead of a visible difference of oil prices, the cost of crude remains remarkably stable. This stability speaks to the deeper concern of a tight global market where demand is matching, or even outpacing, the supply being added. 

Asia fuels a significant part of the demand, with major economies like China and India increasing their industrial activity. Throw in the ongoing geopolitical tension in oil-producing regions, like the Middle East, and it spells a more sensitive market than the headlines may suggest. 

ExxonMobil’s Profit Warning

Although prices are holding steady at the pump, oil producers aren’t necessarily celebrating. In fact, ExxonMobil released a rare mid-year warning, forecasting that its Q2 profits could fall as much as $1.9 billion compared to the previous quarter. Why this predicted drop in profits? On one side of things, you have falling prices for oil and natural gas liquids, and on the other, softer refining margins. 

That may sound a bit confusing, especially when oil prices haven’t crashed. Still, it highlights a critical factor in the energy industry— not all barrels of crude are the same, and not all elements of the oil and gas value chain respond in kind to market shifts and trends.

For a global supermajor like ExxonMobil, which is involved in everything from upstream drilling to downstream chemicals and refinery work, the financial outlook is influenced by more than just the headline price per barrel. Certain regions, such as European markets and the U.S., have been weaker with political unrest and dynamic shifts. Despite historically being a bright spot for ExxonMobil, refining margins have narrowed, particularly for gasoline and diesel fuels. In other words, ExxonMobil may be pumping plenty of oil, but it’s earning only a few cents on each barrel. 

This diminished profit margin could be attributed to multiple factors, including unrest in the Middle East, potential tariff scares, or rising marginal costs per barrel. 

Is the Oil Market Tighter Than We Think? 

So, the question remains: why haven’t we seen a significant price drop, even with more oil in the market? It appears that the global market may be tighter than it initially seems.

The International Energy Agency (IEA) reports that demand growth in 2025 is expected to slow to 700,000 barrels per day, indicating a notable excess or surplus of oil supply. 

Given OPEC’s hike in production and ExxonMobil’s diminished profit outlook for Q2, the signs point to a slimmer gap between supply and demand than previously thought. Despite some indicators pointing to a surplus, the IEA projects a narrower market. 

In a monthly report, the agency noted, “The decision by OPEC+ to further accelerate the unwinding of production cuts failed to move markets in a meaningful way, given tighter fundamentals/price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances.”

Rising Operation Costs + Expensive Oilfield Services = Shrinking Margins 

We are wrestling with a consistent problem that doesn’t always receive the traction or attention it deserves in the industry—rising operational costs. After years of belt-tightening, the oil field sector is more expensive across the board, on everything from fracking, drilling, and pressure pumping to well casing and logistics. 

As the cost of living and inflation increased, so did the cost of services vital to the oil and gas industry. This is particularly visible in mature shale basins, where companies must drill deeper and execute more complex wells. These mature oil fields also contend with growing infrastructure demands, particularly as technology advances. 

This being the case, marginal barrels cost even more to extract and refine. Even large producers like ExxonMobil are feeling the quiet squeeze of increased operational costs, as evidenced by the projected decline in profits for Q2. 

Q3 Tipping Point

As Q3 presses on, the market is entering a new phase that could determine the outlook for energy futures for years to come. Prices are stable, but the market remains unstable due to geopolitical complexity, increased operational costs, and slimmer profit margins. Supply is on the rise, but so is the cost of production and operation. 

Success in this new phase of Q3 will not only be determined by how much oil can be produced, but also by how wisely you can produce it, and how much profit can be made when the dust settles. 

Stay In The Know with Shale

While the world transitions, you can count on Shale Magazine to bring me the latest intel and insight. Our reporters uncover the sources and stories you need to know in the worlds of finance, sustainability, and investment.

Subscribe to Shale Magazine to stay informed about the happenings that impact your world. Or listen to our critically acclaimed podcast, Energy Mixx Radio Show, where we interview some of the most interesting people, thought leaders, and influencers in the wide world of energy.

Subscribe to get more posts from EN Media Team