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Big Oil's profits from refining are expected to decline in 2025
Oil executives are not optimistic about the refining industry in 2025 Exxon and Chevron Q4 profit hurt by weak refinery sector Fuel demand in the US and China is waning, posing challenges for independent refiners Sheila Dang & Shariq Khan HOUSTON, January 31 - Big Oil executives saw little hope for a near-term increase in refinery profits, after Chevron Exxon Mobil, and Shell reported earnings in the fourth quarter that were severely affected by a decline in margins. Refining margins have been hurt by a combination of sputtering growth in demand and an increase in global refinery capacity in 2024. Chevron shares fell 4% following its first loss in the refining sector since 2020. The No. 2 U.S. producer of oil missed Wall Street's profit forecast. In an interview, Chevron CEO Mike Wirth stated that the trend of softening margins through 2024 will continue and extend into 2025. He said, "There's no doubt that it was a poor fourth quarter," in an interview. "I won't call it a storm of the century, but I will say that it was a quarter where everything went in one direction and was negative." Wirth said Chevron will focus on what they can control to recover, including lighter maintenance schedules for refineries in the coming year. Exxon Mobil shares dropped 2.5% following a 75% drop in adjusted earnings for refining when compared to the third quarter. S&P 500 Energy Sector Index fell 2.8% on the Friday. Kathryn Mikells, Exxon's Chief Finance Officer, stated in an interview that the refining industry is still under pressure due to the additional fuel entering the market as a result of new refineries opening in countries all over the world. She said, "That is what we are watching as we look forward to 2025." The number one U.S. oil producer still beat profit estimates with higher production from the Permian basin, the top U.S. oilfield, and Guyana, which is the latest hotspot for oil. The No. Shell, a UK-based company, said Thursday that it has no plans to expand its refining business but also does not intend to leave it. In part due to lower refining margins, the company's earnings for the fourth quarter of 2008 nearly halved to $3.66 Billion. Shell sold its chemical and refining hub in Singapore in the past year, and it plans to close another plant in Wesseling in Germany. HIT TO INDEPENDENT RIFERS Oil majors were cushioned by higher production of oil and gas, but pure-play refiners suffered as the demand for fuel in the U.S., and China, two of the largest oil consumers, fell. Phillips 66s profit for the fourth quarter dropped to $8 million, down from $1.26 Billion in the previous quarter. Valero’s refining profits dropped by 73% in its fourth quarter. Valero CEO Lane Riggs said on Thursday that two U.S. refining plants are scheduled to close in this year, and limited capacity increases beyond 2025 should help sustain the margins of refineries over the long-term. Investors also worried about U.S. president Donald Trump's threat to impose tariffs for crude imports from Canada or Mexico on February 1, which could increase costs for U.S. refining companies. TotalEnergies, the French oil giant, will announce its fourth-quarter results on February 5, and British oil producer BP on February 11. BP warned that a decline in the refining margins, as well as the impact of maintenance and turnaround activities could result in a quarterly profit drop of up to $300,000,000. Sheila Dang reported from Houston, and Richard Valdmanis edited the story with Simon Webb and Margueritachoy.
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Wall St. ends lower after White House announces Trump will implement tariffs
U.S. stock indexes lost ground on Friday after the White House announced that U.S. president Donald Trump would implement tariffs on Saturday of 25% on Canadian, Mexican and Chinese imports. Investors are bracing themselves for more tariff news, after Trump warned repeatedly about the use of this measure. The uncertainty over tariffs' impact has clouded the economy and inflation outlook. Sources familiar with Trump's tariff plans said earlier that Trump would announce tariffs against Canadian and Mexican imports this Saturday, but defer the collection of duties until March 1. The White House spokesperson called this report "false." She stated that the duties will be published on Saturday, and they will take effect immediately. The stock market fell on the following day after the White House's comments. "I thought the market would have been down more. It's more than just the announcement, which I believe will affect a few industries. "It's the retaliation," said Rick Meckler of Cherry Lane Investments in New Vernon, New Jersey, a family-owned investment office. Early in the session, data on the economy reinforced expectations that Federal Reserve would maintain interest rates for a longer period. As expected, U.S. consumer spending increased in December. Scott Wren is a senior global market analyst at Wells Fargo Investment Institute, St. Louis. He said, "It makes perfect sense that the Fed did not do anything in this week and that (Fed Chairman) Jay Powell says they aren't in a rush to lower rates." According to preliminary data the S&P 500 dropped 31.10 points or 0.51% to finish at 6,040.07, while the Nasdaq Composite fell 58.47 or 0.30% to 19,623.27. The Dow Jones Industrial Average dropped 341.68 points or 0.76% to 44,540.45. Powell, the U.S. central Bank's chairman, said that Powell wants to wait for further inflation progress before reducing rates. Apple shares were volatile. Apple's earnings report on Thursday was dominated by upbeat comments from its executives, a sign that the company expects to recover after a drop in iPhone sales due to AI features. Chevron's shares dropped after it reported earnings that were below expectations for the fourth quarter.
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Petrobras Brazil raises diesel prices first time since 2023. Shares rise
Petrobras, the state-run Brazilian oil company, announced on Friday that it would increase the price of diesel sold to its distributors for more than a month. This was a much anticipated change in fuel prices, which sent the shares up. Petrobras announced that it will increase the price of diesel at refinery gates by 0.22 reals per liter to an average of 3.72 reais (about $0.6376) starting February 1. This is the first rise since October 2023. Petrobras preferential shares rose by around 2% on the B3 Brazilian stock exchange in the afternoon following news of this hike. Analysts said that the adjustment brings Petrobras' prices into line with the international market. The markets were eagerly anticipating an announcement after local media reported this week that Luiz Inacio Lula had authorized Petrobras to take the action, since its prices are lower than the current international prices. Lula said on Thursday that it wasn't up to him whether Petrobras made any adjustments to the fuel prices. He left the door open for Petrobras if they deemed it "important." Diesel's price increase comes as the government is working to reduce food prices following a recent poll that showed Lula's approval ratings dropping. Petrobras, under Lula's administration, has adopted a pricing strategy designed to protect Brazilian fuel prices from the volatility of international markets, while maintaining a profitable sales model for the company.
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What is worrying US executives about tariffs?
In the early days this quarter's earning season, tariffs were on executives' minds as U.S. president Donald Trump threatened to hit Mexico and Canada with levies against imported goods. The tariffs will now be implemented on March 1 with an announcement made on Saturday. However, it's possible that Trump may back down on his threats or only target specific industries. This quarter, the topic of how companies are navigating this issue will be a major focus on investor events and conference calls. Nearly 200 of the S&P 1000 - a group of large, mid and small cap stocks - mentioned "nearshoring," tariffs or supply chain during the month of January. Many CEOs have made similar remarks to Textron CEO Scott Donnelly who stated on Jan. 22, "we're going to just kind of hold in there and watch how it all plays out." Here are some of what trade executives are talking about: In recent weeks, several companies have talked about the difficulties of moving production. Tariffs may apply to companies that manufacture in both the United States and Mexico or Canada. Brent Yeagy is the CEO of Wabash National, a transportation logistics company. He said: "We have capacity available in our domestic operations that can shift production as required to minimize any tariff impacts." Polaris, a manufacturer of power sports vehicles, spoke about it on its earnings call. It noted that in 2017, Polaris moved quickly to leave China and now faces possible tariffs because of production facilities in Mexico. It also has to deal with increased labor costs in its U.S. operation. Michael Speetzen said, "We have been incredibly under-represented in the powersports industry." This was during a call with investors on January 28. "We are the only U.S. manufacturers, yet we pay tariffs." MOVE SHIPMENTS AROUND Some companies have indicated they may consider moving where they send their shipments. Some large global companies with multiple operations may be able adjust shipments to a different location. William Oplinger, CEO of Alcoa, said on January 22 that the Middle East, India and other countries with lower tariffs could increase imports, while Canadian Aluminum would be diverted to Europe and others. He said that a 25% tax on Canadian aluminum exported to the United States would cost U.S. consumers between $1.5 and $2 billion per year. SALES ACCELERATION In both the previous and current quarters, many companies have already reported that customers are increasing their orders in anticipation of tariffs. General Motors, for example, accelerated delivery to get ahead before tariffs. Some companies anticipate that Trump will announce an accelerated tariff schedule, which would then lead to pre-emptive purchasing. "I don't see any increased pre-buying activity for products. Neil Schrimsher CEO of Applied Industrial Technologies said that most people are taking the stance they will have a notice period if and when these events occur. Inflation and Pricing Many executives have stated that tariffs will be passed onto consumers. Eric Cremers commented during the earnings call of PotlatchDeltic that he knew of a Canadian producer of lumber who would attempt to pass 100% of tariff costs on to their customers. "Now, will they be able get 100% of whatever duty it is or not?" Who knows how things will end up, but they plan to pass this on to the consumers."
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Brava's onshore assets can be purchased through the Fluxus process in Brazil
Fluxus, a Brazilian oil and natural gas company owned by the conglomerate J&F has decided to withdraw its bid to purchase assets onshore owned by Brava Energia. This was announced in a Friday statement. Fluxus was invited to take part in the second phase of the sales process, but after a preliminary review decided to not proceed. This pushed Brava Energia's shares lower. Sources familiar with the issue told the media earlier this month that Fluxus made a non-binding bid for the assets onshore as part of its expansion strategy. However, the interest would depend on the results of further analysis. Sources stated at the time, that Brava was formed by a merger of 3R Petroleum with Enauta in the past year. The assets were valued at approximately $2 billion. Brava said last week that its board had decided which bidders were qualified to continue in the process. They would be receiving letters with guidelines on how to carry out due diligence and make binding offers. The J&F owned company stated that "Fluxus has been invited to participate in the competition process for Brava Energia's onshore assets, and to then proceed to the next round." Fluxus, however, decided to discontinue the process after preliminary analysis. Following the Fluxus announcement, Brava shares in Sao Paulo, which had risen as high as 6.2% on Friday, saw their gains revert to 2%. (Reporting and writing by Leticia Furcuchima, Gabriel Araujo, Christina Fincher, Editing).
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Iran Foreign Minister: Attacking our nuclear sites would 'be one of the biggest mistakes US could do'
In an interview broadcast on Friday, Tehran's Foreign Minister told Al Jazeera TV that Iran would respond quickly and decisively in the event of an attack against its nuclear sites. This would result in a "war in all directions in the region." Abbas Araqchi, a translator for Abbas Araqchi, said that a joint military strike by Israel and the U.S. against Iranian nuclear facilities was "one of the worst historical mistakes" the U.S. can make. Iran's decision makers are increasingly concerned that U.S. president Donald Trump, in his second term, might empower Israeli Prime Minister Benjamin Netanyahu by allowing him to strike Iran’s nuclear sites and tighten U.S. oil sanctions. These concerns, along with growing anger in Iran about economic conditions, may drive Tehran to engage in negotiations with Trump's administration regarding the fate of the rapidly advancing nuclear program. Araqchi suggested the United States release blocked Iranian funds to build confidence between the two countries. The U.S. has frozen Iranian assets and funds at different points, but not in accordance with its earlier promises (to release them). The U.S. government can do these things to build trust between us, Araqchi said. In 2018, the then-President Trump broke the 2015 nuclear agreement between Iran and an international group of powers, and reimposed harsh U.S. Sanctions as part of his policy of "maximum press" against the country. Tehran responded by violating the agreement in multiple ways, including by speeding up its uranium-enrichment. Trump has promised to return to his policy of using economic pressure to force a country to negotiate an agreement on its nuclear program, ballistic missile programmes and regional activities. (Reporting and editing by Hugh Lawson; Additional reporting provided by Dubai newsroom.
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Brazil's carbon trading takes off but agribusiness is not scrutinized
Brazil sets basic rules on its carbon market Largest polluters, farmers escape cap to emissions Protecting natural areas will receive more funding By Andre Cabette Fabio The rules don't limit emissions from agriculture, which is the top sector in the country for carbon pollution, accounting for 74% of all emissions. "We missed the chance to bring agribusiness into a regulated sector, which would not only limit emissions but also promote sustainability," said Gabriela Savian. She is the deputy director of policy at IPAM, the Amazon Environmental Research Institute. According to Natalie Unterstell of Instituto Talanoa in Brazil, a climate policy think tank, with farmers gone, the new cap-and-trade market for carbon emissions will only cover about 16%. The regulation, even though it exempts the largest emitters in the country from any responsibility, is expected to provide legal security and encourage carbon projects which protect forests against the pressure of the agribusiness industry. In cap-and trade systems, the government assigns a limit to each sector's carbon emissions. Companies that exceed this limit can purchase allowances from other companies who still have room. According to the European Commission, in the European Union's largest cap-and trade system by value, approximately 40% of emissions in aviation, industry, and energy sectors are covered. These emissions are mainly connected to the burning of fossil fuels. Brazil is different. Its basic carbon market regulations were signed into law by the Brazilian government in December. The Climate Observatory of the United States reports that its largest source of emissions is its 240-million-strong cattle herd, and the destruction of vast natural areas to make way for pastures and grain fields. The powerful caucus of agribusiness leaders, who dominate the Brazilian congress, demanded that the farming sector be left uncapped. They argued that cap-and-trade does not set a limit for agriculture because counting emissions by producers is a difficult technical task, which critics claimed researchers could overcome. In a statement from 2023, Pedro Lupion, the president of Brazil's Parliamentary Agricultural Front wrote that "no country in the entire world has regulated the agriculture sector due to the lack of a scientifically proven metric". Funding for Forest Protection Savian said that as part of their efforts to reduce emissions, the big polluters will become a greater source of funding to forest protection initiatives. This could ease pressure from farms. She said that, "even though there is no cap on the greatest emitter - deforestation - the cap-and trade system structures the opportunity to fund schemes... that combat deforestation" and "promote regeneration". A growing number of Brazilian companies and state governments are sourcing carbon credits through forest conservation and restoration projects. Carbonext is one of these companies, and it runs 11 projects with the help of farmers and communities. It sources carbon from forests covering 322,000 hectares. These offsets are sold on the voluntary carbon market by companies who wish to compensate their emissions, even if they do not have to. Carbonext CEO Janaina Dallan expects that in the future she will be able sell credits for companies to comply with the cap-and-trade regulations, giving Amazon a non-destructive alternative to income. Tocantins, and Para are two Amazonian states that have made strides on the carbon market. They announced plans to sell jurisdictional offset credit worth more than 600 million dollars. These offsets are sourced from governments who have successfully reduced deforestation within their jurisdictions or captured carbon. Assets are protected from land tenure issues, which have damaged the reputation of Brazilian private projects, who have operated on land that is disputed, embarrassing the buyers. These credits are calculated on the basis of each jurisdiction's ability to reduce their deforestation rate, which is a clear indication. Private projects, however, have been accused of obtaining excessive credits through inflating deforestation risks in the areas in which they intervene. Raul Protazio is the secretary of environment and sustainability for the state of Para. Para hosted the U.N. climate summit COP30 this year. The COP Climate Summit last year laid the foundation for a United Nations-supervised international carbon market. This has raised expectations for this kind of global cooperation.
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EIA reports that US oil production fell in November after reaching a record high in October
The U.S. Energy Information Administration reported in its Petroleum Supply Monthly Report on Friday that U.S. crude production dropped by 122,000 barrels a day in November, to 13,314 million barrels a day, from a record monthly high of 13,436 million barrels bpd set in October. The data revealed that the EIA's measure of demand for crude oil and petroleum fell by 775, 000 bpd, to 20,235 million bpd, in November. This was the lowest level since April 2024. This compares to a record monthly supply of crude oil, and petroleum of 21.666 millions bpd reached in August 2005. The product supply of finished motor gas fell by 260.000 bpd, to 8.808 millions bpd, in November. This is the lowest level since February 2024. Meanwhile, the product supply of distillate fuel fell by 383,000 to 3.676million bpd, which is the lowest level since June 2024. In the top oil producing states, monthly production in November decreased by 1.2% in Texas to 5.761 millions bpd and 1.8% in New Mexico to 2.064million bpd, but increased 3.5% in North Dakota to 1.197million bpd. This compares to monthly record highs in Texas of 5.831 millions bpd, in New Mexico of 2.102 million in October 2024, and in North Dakota of 1.499 in November 2019. According to the 914 report of the U.S. Agency for Natural Gas, the gross natural gas production in Lower 48 States increased by 0.2% to 115.8 billion cubic feet per day (bcfd) in November. This compares to a monthly high of 117.8 billion cubic feet per day in February 2024. In the top producing states of Texas and Pennsylvania, monthly production in November decreased by 0.4% in Texas to 36.1 Bcfd. It increased by 0.8% in Pennsylvania to 20.0 Bcfd. This compares to monthly record highs in Texas of 36.3 Bcfd and Pennsylvania of 21.9 Bcfd, both in December 2021. (Reporting and editing by Rod Nickel, Nia Williams and Scott DiSavino)
Dow, S&P 500 and Dow decline as White House announces Trump will implement tariffs
S&P 500, Dow and Dow Jones were all slightly lower in Friday's trading. Indexes lost ground after the White House announced that U.S. president Donald Trump would implement tariffs on Saturday of 25% on Canadian imports, 10% on Chinese products and 25% on Mexican imports.
Investors are bracing themselves for more tariff news, after Trump repeatedly warned against using this measure.
Sources familiar with Trump's tariff plans said earlier that Trump would announce tariffs against Canadian and Mexican imports this Saturday, but defer the collection of duties until March 1.
Early in the session, data on the economy reinforced expectations that Federal Reserve would maintain interest rates for longer.
As expected, U.S. consumer spending increased in December.
It makes perfect sense that the Fed did not do anything in this week and it is also logical (Fed chair) Jay Powell said they aren't in a rush to lower interest rates," said Scott Wren. He's a senior global strategist at Wells Fargo Investment Institute, located in St. Louis.
The Dow Jones Industrial Average dropped 257.03 or 0.57% to 44,625.10. The S&P 500 fell 13.92 or 0.23% to 6,057.25 while the Nasdaq Composite rose 6.06 or 0.03% to 19,687.81.
In its Wednesday policy announcement, the Fed kept rates at their current levels.
Futures that settle at the policy rate of the central bank showed traders were still betting on the Fed delaying rate cuts until June, and reducing them by 70%.
Apple was the last to fall. Apple was the last to fall.
Chevron's shares dropped after it reported earnings that were below expectations for the fourth quarter.
(source: Reuters)