Big Oil Braces for Another Tough Year in Refining in 2025

Big Oil executives are bracing for another challenging year in the refining sector in 2025, as the industry grapples with increased global refining capacity, sputtering demand growth, and lower fuel prices. The combination of these factors has led to a significant decline in refining profits for major oil companies, with Chevron, ExxonMobil, and Shell all reporting weak fourth-quarter earnings in the refining business.

Chevron's shares declined 4% after it reported a loss in its refining business for the first time since 2020, causing the No. 2 U.S. oil producer to miss Wall Street's profit estimate. "This trend we have seen of margins softening through 2024 is something you can expect to continue to see, to extend into 2025," Chevron CEO Mike Wirth said in an interview. ExxonMobil's shares fell 2.5% after it reported a 75% plunge in adjusted earnings from refining compared with the third quarter. The broader S&P 500 Energy Sector index was down 2.8% on Friday.

The refining business remains under pressure from additional fuel supply entering the market after new refineries opened in different countries around the world, said Exxon's Chief Financial Officer Kathryn Mikells in an interview. "That's really what we're watching as we look ahead to 2025," she said. The No. 1 U.S. oil producer still beat profit estimates with higher oil and gas production from the Permian basin, the top U.S. oilfield, and Guyana, the latest oil hotspot.



UK-based Shell said on Thursday that while it had no plans to exit the refining business, it did not plan to expand either. The company's fourth-quarter earnings nearly halved from the previous year to $3.66 billion, partly due to weaker refining margins. Shell sold its refining and chemicals hub in Singapore last year and plans to shut down another plant in Wesseling, Germany. The company's strategic decision to divest refining assets and focus on other areas of its business, such as liquefied natural gas (LNG) and petrochemicals, is likely to help it maintain profitability in the coming year.



Investors were also worried about U.S. President Donald Trump's threats to impose tariffs on crude imports from Canada and Mexico on Feb. 1, which could raise costs for U.S. refiners. French oil major TotalEnergies will report fourth quarter results on Feb. 5 and British oil producer BP reports on Feb. 11. BP has warned that a drop in refining margins and the impact of turnaround and maintenance activity would result in an up to $300 million decrease in profit quarter-on-quarter.

In conclusion, Big Oil executives are bracing for another tough year in the refining sector in 2025, as the industry continues to grapple with increased global refining capacity, sputtering demand growth, and lower fuel prices. The strategic decisions of major oil companies, such as Chevron, ExxonMobil, and Shell, regarding refining expansion, maintenance, and divestments are expected to impact their refining profitability in the coming year. Geopolitical events, such as U.S. trade tariffs on crude imports from Canada and Mexico, can also play a significant role in shaping the refining landscape and profitability for Big Oil companies in 2025.