For oil companies, the second quarter might be as good as it gets.
Shares gained more than in any other industry, thanks to crude rising from a 12-year low. Profits were the best in at least three quarters for majors including Royal Dutch Shell Plc, Chevron Corp. and BP Plc, helped by cost cuts, analysts say. The rest of the year might not be as rosy as supply holds near record levels.
The combined market value of the world’s oil companies shrank by $2 trillion in the past two years following crude’s collapse. While analysts agree the worst of the oversupply is over, BNP Paribas SA and JBC Energy GmbH are among those forecasting a slide back to $40 a barrel as output rebounds in Canada, Iran, Nigeria and the U.S., hurting producers whose investment cuts have put future growth in doubt.
“The oil market has still to absorb higher supply from the return of disrupted production,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said Thursday. “Oil prices could fall to $40 again.”
West Texas Intermediate crude averaged $45.64 a barrel last quarter and Brent $47.03, recovering from less than $28 for both grades earlier in the year. The 89-member MSCI World Energy Index, led by Exxon Mobil Corp., Chevron and Shell, rose 9.7 percent in the three-month period. It beat the 5.2 percent advance of the next strongest sector, health care, and the 0.3 percent gain of the MSCI World Index.
The last time the energy index surpassed every other sector was in the second quarter of 2014, just when oil’s slump was starting. Six months later, the index turned out to be the worst performer of the year. Brent is down 9 percent this month and WTI 9.4 percent.
“The road ahead is far from smooth,” the International Energy Agency cautioned July 13 as it said bloated stockpiles will continue to damp oil prices. Inventories of crude and refined products in the U.S., the biggest oil consumer, swelled to a record 1.385 billion barrels last week, data from the Energy Information Administration show.
For a wrap of analyst oil-price predictions, click here.
BP will be the first of the five biggest non-state oil majors to announce second-quarter earnings on July 26. Analysts surveyed by Bloomberg estimate the company will post adjusted net income of $822 million, 37 percent lower than a year earlier but the highest in three quarters. Its results are likely to indicate how the others will perform.
Shell is expected to report adjusted profit of $2.24 billion on July 28, according to the average of nine estimates. That would be the highest since the second quarter of 2015. Total SA will also publish results July 28, and Exxon and Chevron the following day.