$63.4 billion in unexpected profits! U.S. oil companies benefit from the surge in oil prices

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Source: Jin10 Data

If crude oil prices remain at high levels after the outbreak of the US-Israel-Iran war, American oil companies could potentially gain over $60 billion in unexpected profits this year.

Investment bank Jefferies’ model estimates that since the conflict erupted on February 28 and oil prices rose about 47%, U.S. producers will have added $5 billion in cash flow just this month. Energy research firm Rystad predicts that if the average U.S. crude oil price for the year reaches $100 per barrel, companies will earn an additional $63.4 billion from oil production.

Last week, Brent crude oil broke through $100 per barrel. U.S. President Donald Trump posted on social media: “The U.S. is the world’s largest oil producer, far ahead. Rising oil prices mean we’re making a killing.” The benchmark U.S. WTI crude also surpassed $100 per barrel on Monday.

The increased cash flow mainly benefits U.S. shale oil companies with limited operations in the Middle East, but the situation for the world’s top five oil giants is more complex. ExxonMobil, Chevron, and European counterparts BP, Shell, and Total Energies have extensive operations in the Gulf region and are more affected by the closure of the Strait of Hormuz.

Several facilities jointly owned by these giants have halted production, and Shell has declared force majeure on LNG shipments from the Ras Laffan plant in Qatar.

Global largest oilfield services company Schlumberger (SLB) issued a profit warning last Thursday, highlighting operational difficulties in the region.

Veteran oil and gas industry expert and Omega Oil and Gas Chairman Martin Houston said, “There are no winners in this crisis. International oil companies are not benefiting. They would prefer to return to normalcy from two weeks ago rather than face a short-term surge in oil prices.” “Middle Eastern national oil companies and their partners need to rebuild damaged facilities, but the real concern is the unprecedented closure of the Strait of Hormuz, even if only for a short time.”

Hope for a quick resolution is slim. Iran’s new Supreme Leader Mojtaba Khamenei said last Thursday that Iran’s military will continue to block the narrow waterway that carries one-fifth of the world’s oil and gas shipments to pressure the U.S. and Israel.

Goldman Sachs research shows that out of the normal 20 million barrels of oil transported daily through the strait, about 18 million barrels are still blocked. The impact on LNG industry is even more severe, with about one-fifth of global capacity shut down.

Canadian Imperial Bank of Commerce (RBC Capital Markets) estimated last Friday that the conflict could last until spring, with Brent crude potentially breaking through $128 per barrel within 3-4 weeks.

Rystad analyst Thomas Liles said, “The closure of the strait will severely impact Middle Eastern oil companies, and Western oil giants—whose upstream production in Qatar, UAE, Iraq, and the Saudi-Kuwait neutral zone accounts for about 20% of global output—will also suffer significant losses.”

According to Rystad data, BP and ExxonMobil have the largest exposure in the Middle East, with over 20% of their global oil and gas free cash flow coming from the region by 2026; Total, Shell, and Chevron account for 14%, 13%, and 5%, respectively.

Recently, the five giants have expanded their presence in the Middle East, signing agreements in countries like Syria and Libya to increase reserves and boost production.

Total said in a trading briefing last Friday that rising oil prices are enough to offset Middle Eastern production losses.

ExxonMobil CEO Darren Woods previously told the Financial Times that the company is adapting to the “global core supply source” shutdown, but it will impact the entire industry. “Our scale and size give us some advantages in resource allocation… We are optimizing operations.”

Analysts say ExxonMobil’s exposure in the Middle East is one reason its stock performance lags behind peers: since the crisis began, its stock has only risen 2% to $156.12, while BP and Shell have surged 11% and 9%, respectively, reflecting investor expectations that European giants’ trading divisions will benefit from oil and gas price volatility.

Bank of America analyst Christopher Kuplent said, “The stock price reflects not just the next one or two quarters.” He pointed out that the market expects oil prices “to fall back to $75 per barrel within months (not years).”

Norwegian state oil company Equinor, which has no Middle Eastern operations, has seen its stock rise more than other Western giants; meanwhile, QatarEnergy, as a major European natural gas supplier, has seen European gas prices soar after halting LNG shipments, further boosting its performance.

After disruptions in Middle Eastern refined oil supplies, companies like Neste and Repsol have seen strong stock performance.

Liles said, “Companies with less Middle Eastern exposure will benefit from high oil prices.”

Paul Sankey, founder of Sankey Research, believes the Middle East crisis will push countries to develop domestic energy sources more actively to avoid supply disruptions and soaring prices. “This could evolve into a demand destruction event, ultimately harming everyone.” He also noted that heavily affected Asian countries may reconsider their stance on nuclear energy. “The market views the unprecedented closure of the Strait of Hormuz as abnormal, but oil historians see it as a sign of a structural shift in oil risks.”