KEY POINTS
- ExxonMobil expects a $4.5bn quarterly boost from refining.
- Refining earnings could reach $8.5bn as fuel margins rise.
- Lower crude prices may cut upstream earnings by $1.3bn.
ExxonMobil expects higher refining margins to significantly increase its downstream earnings in the third quarter of 2026, with the oil major signalling a potential $4.5 billion improvement compared with the previous quarter.
The expected increase comes as global fuel prices rise amid disruptions to energy supplies linked to the ongoing Iran war and Ukrainian attacks on Russian refineries.
In a regulatory filing published on Friday, October 16, the US oil producer indicated that stronger refining margins could lift earnings from its refining business, even as lower crude oil prices weigh on its upstream operations. ExxonMobil is scheduled to publish its full third-quarter results on October 30.
ExxonMobil’s refining business is expected to benefit from the widening difference between the prices of refined fuels and the cost of crude oil used to produce them.
According to BMO Capital Markets analyst Phillip Jungwirth, the company’s regulatory filing suggests that adjusted net income from refining could rise to $8.5 billion in the third quarter. That would be more than double the previous quarter’s profit level.
The projected improvement reflects the favourable conditions for refiners as supply disruptions push up fuel prices and increase refining margins.
Refining margins are a key measure of profitability for companies that convert crude oil into products such as petrol, diesel and jet fuel. When fuel prices rise faster than crude oil costs, refiners can earn more from processing each barrel.
However, the projected earnings increase remains an estimate ahead of the company’s full financial results.
Iran war and attacks on Russian refineries tighten supply
The surge in refining margins has been linked partly to the ongoing conflict involving Iran, which has restricted energy exports through the Strait of Hormuz, a critical route for global oil and gas shipments.
Ukrainian attacks on Russian refineries have also contributed to concerns about fuel supply availability.
Disruptions in major energy-producing regions can reduce the volume of crude oil and refined products reaching international markets, putting upward pressure on prices.
These developments have created more favourable conditions for some refiners, including ExxonMobil, although the wider impact varies across different parts of the oil and gas business.
Higher fuel prices have also created political pressure in the United States, where consumers face the effects of increased energy costs. While refining earnings are expected to rise, ExxonMobil’s upstream business could face weaker results.
The company indicated that earnings from oil and gas production could decline by $1.3 billion compared with the second quarter.
Data from LSEG showed that the average closing price of Brent crude fell by about 5.6 per cent in the third quarter compared with the previous three months.
Lower crude prices can reduce the revenue oil producers earn from selling their output, even when their refining operations benefit from stronger fuel margins.
The contrasting outlook highlights how movements in commodity prices can affect different parts of an integrated oil company’s business in different ways.
ExxonMobil also said it experienced no volume-related disruptions during the quarter stemming from the Iran war. ExxonMobil indicated that the sale of some upstream assets would provide an additional earnings boost of about $700 million.
The divestments are expected to contribute to its financial performance, partly offsetting the pressure from weaker crude prices on its production business.
The company operates across several parts of the energy value chain, including oil and gas production, refining and the sale of petroleum products. This integrated structure can help balance changing market conditions, although it does not eliminate the effects of price volatility.
Investors will be watching the company’s full results for more details on how refining gains, upstream performance and asset sales affected overall profitability during the quarter.
