Energy Stocks Struggle Amidst Q2 Earnings Decline Amid Crude Oil Price Slump and Rising Natural Gas Demand

The energy sector is facing challenges in Q2 2025 due to falling crude oil prices and narrowing profit margins. Crude oil prices dropped 20.9% YoY to $64.63/bbl, while natural gas prices rose 50% YoY to $3.19/MMBtu. The sector is expected to see a -22.9% YoY decline in earnings, with profit margins contracting by 1.54%. This contrasts with strong earnings growth in other sectors like Tech (+14.5%), Finance (+16.7%), and Consumer Discretionary (+109.7%).

The energy sector is navigating a challenging environment in the second quarter of 2025, with crude oil prices on a significant decline and profit margins under strain. The oil market continues to be challenged by global economic uncertainty and fears of excess supply, leading to a projected downturn in energy-related earnings. This downturn contrasts sharply with the growth seen in other sectors.

In the second quarter of 2025, crude oil prices saw a substantial drop. The average price of West Texas Intermediate crude fell to $64.63 per barrel, representing a 20.9% decrease compared to the previous year's price of $81.71. This decrease was primarily due to escalating trade tensions between the United States and China, sparking concerns about a potential global economic slowdown and the prospect of an oil surplus. Additionally, higher fuel inventories and reduced demand forecasts further pressured oil prices [2].

Meanwhile, natural gas prices saw a considerable rise. The Henry Hub spot price averaged $3.19 per million British thermal units (MMBtu) during the same period, marking a 50% increase from $2.09 per MMBtu in the second quarter of 2024. The surge in natural gas prices was attributed to several factors, including strong demand driven by colder weather, increased electricity consumption, and substantial LNG exports that strained domestic supply. Furthermore, lower-than-usual inventory levels and persistent supply concerns contributed to the price hike [2].

The energy sector is expected to see a -22.9% year-over-year decline in earnings, with profit margins contracting by 1.54%. This is in stark contrast to the strong earnings growth seen in other sectors such as Tech (+14.5%), Finance (+16.7%), and Consumer Discretionary (+109.7%) [2].

Major oil and gas companies, including ExxonMobil and Chevron, reported significant declines in profits due to falling oil prices. ExxonMobil's net profit fell 23% to $7.08 billion, while Chevron's net profit declined 44% to $2.49 billion [1]. Despite the overall earnings decline, both companies exceeded analysts' expectations for earnings per share (EPS), with ExxonMobil reporting $1.64 and Chevron $1.77 [1][2].

ExxonMobil's revenue decreased 12% to $81.51 billion, surpassing market expectations, while Chevron's revenue fell 12% to $44.82 billion, missing projections [1][2]. The substantial decrease in crude oil prices, which fell below $60 a barrel, significantly impacted their earnings [4]. Additionally, Chevron's earnings were affected by a $215 million loss on the fair market value of Hess shares following the completion of the $53 billion acquisition [2].

Chevron's acquisition of Hess, which was finalized after prevailing against Exxon Mobil in a long-running dispute, is expected to begin contributing to earnings in the fourth quarter and reduce annual run-rate costs by $1 billion by the end of 2025 [2]. The Hess acquisition will add assets in the Bakken formation and Gulf of Mexico in addition to Guyana [2].

ExxonMobil's earnings were bolstered by higher liquid production from the United States and stronger industry refining margins resulting from higher seasonal demand and increased volumes [3]. However, these positives were partially offset by lower crude oil and natural gas prices [3].

Both companies have been moving toward more collaborative strategies in the second half of this decade, which may influence their future earnings and market positioning [1]. As investors assess the impact of these earnings reports, they will closely monitor future developments in oil prices and the integration of Hess into Chevron's portfolio.

References:
[1] https://www.investors.com/news/chevron-exxon-mobil-q2-earnings-fresh-off-guyana-ruling/
[2] https://www.cnbc.com/2025/08/01/chevron-cvx-q2-earnings-2025.html
[3] https://finance.yahoo.com/news/exxonmobil-q2-earnings-surpass-estimates-162900242.html
[4] https://www.investopedia.com/exxonmobil-chevron-profits-slump-on-falling-oil-prices-11783267