Five of the world's largest energy companies are expected to report combined second-quarter profits next week of more than $30 billion, a bounty fueled by worldwide economic growth and political instability that helped keep the price of crude oil above $70 a barrel.
The petroleum industry is braced for a backlash in Washington, where elected o…žcials are concerned about constituents in parts of the country paying more than $3 a gallon at the pump.
However, some analysts say companies could face less criticism than usual given the attention focused on violence in the Middle East.
Whatever the political fallout, the industry has done right by Wall Street's standards. The five oil behemoths releasing quarterly results next week -- BP PLC, ConocoPhillips, Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC -- earned an estimated $33.6 billion, or 32 percent more than a year earlier, according to analysts surveyed by Thomson Financial.
World oil prices that rose 33 percent, on average, helped drive the earnings growth. On Friday, U.S.-benchmark crude-oil futures settled at $74.43 as traders nervously eyed an expected Israeli ground invasion of southern Lebanon. The market fears that the fighting could draw Iran, a key oil producer and supporter of Hezbollah, into the conflict.
BP will be the first major oil company to report second-quarter results. The London-based company is expected to disclose Tuesday the weakest year-on-year performance among its peers, weighed down by the loss of output from a massive offshore platform damaged by last summer's hurricanes, and lost production and repair costs associated with a deadly explosion last year at a Texas refinery.
Even so, BP could post net income of $6.3 billion, or 11 percent more than a year earlier, analysts say -- showing just how effective soaring oil and gasoline prices can be at masking operational difficulties.
Energy consumers deserve credit, too; the industry benefited from a global fuel appetite that just wouldn't quit. The International Energy Agency estimates that world oil demand averaged 82.4 million barrels a day in the second quarter, or 1.5 percent above the prior year, generating more than $500 billion for petroleum producers. That's roughly equivalent to the annual gross domestic product of South Africa.
The average profit margin from refining was $19.10 a barrel of crude, or 60 percent higher than a year ago, according to J.P. Morgan. Independent refiners such as Valero Energy Corp. and Tesoro Corp., which report their secondquarter results in early August, were the greatest beneficiaries.
One slight drag on the integrated oil industry's performance was a year-on-year decline in average U.S. natural gas prices, which have continued to slump into the third quarter because of record U.S. inventories following a mild winter.
Going forward, the oil majors' profit growth could face stronger headwinds, said John Parry, senior equity analyst at John S. Herold.
Looking beyond summer -- and the threat of hurricanes -- Parry sees oil prices flattening out and then tailing off toward the end of 2006, especially if economic growth continues to slow, as Federal Reserve Chairman Ben Bernanke warned twice this week.
J.P. Morgan is forecasting average oil prices of $54 a barrel in 2007, and the IEA says the world's supply cushion will grow considerably next year as more production from Africa, the Caspian Sea and the recovering Gulf of Mexico comes on stream.
The petroleum industry is braced for a backlash in Washington, where elected o…žcials are concerned about constituents in parts of the country paying more than $3 a gallon at the pump.
However, some analysts say companies could face less criticism than usual given the attention focused on violence in the Middle East.
Whatever the political fallout, the industry has done right by Wall Street's standards. The five oil behemoths releasing quarterly results next week -- BP PLC, ConocoPhillips, Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC -- earned an estimated $33.6 billion, or 32 percent more than a year earlier, according to analysts surveyed by Thomson Financial.
World oil prices that rose 33 percent, on average, helped drive the earnings growth. On Friday, U.S.-benchmark crude-oil futures settled at $74.43 as traders nervously eyed an expected Israeli ground invasion of southern Lebanon. The market fears that the fighting could draw Iran, a key oil producer and supporter of Hezbollah, into the conflict.
BP will be the first major oil company to report second-quarter results. The London-based company is expected to disclose Tuesday the weakest year-on-year performance among its peers, weighed down by the loss of output from a massive offshore platform damaged by last summer's hurricanes, and lost production and repair costs associated with a deadly explosion last year at a Texas refinery.
Even so, BP could post net income of $6.3 billion, or 11 percent more than a year earlier, analysts say -- showing just how effective soaring oil and gasoline prices can be at masking operational difficulties.
Energy consumers deserve credit, too; the industry benefited from a global fuel appetite that just wouldn't quit. The International Energy Agency estimates that world oil demand averaged 82.4 million barrels a day in the second quarter, or 1.5 percent above the prior year, generating more than $500 billion for petroleum producers. That's roughly equivalent to the annual gross domestic product of South Africa.
The average profit margin from refining was $19.10 a barrel of crude, or 60 percent higher than a year ago, according to J.P. Morgan. Independent refiners such as Valero Energy Corp. and Tesoro Corp., which report their secondquarter results in early August, were the greatest beneficiaries.
One slight drag on the integrated oil industry's performance was a year-on-year decline in average U.S. natural gas prices, which have continued to slump into the third quarter because of record U.S. inventories following a mild winter.
Going forward, the oil majors' profit growth could face stronger headwinds, said John Parry, senior equity analyst at John S. Herold.
Looking beyond summer -- and the threat of hurricanes -- Parry sees oil prices flattening out and then tailing off toward the end of 2006, especially if economic growth continues to slow, as Federal Reserve Chairman Ben Bernanke warned twice this week.
J.P. Morgan is forecasting average oil prices of $54 a barrel in 2007, and the IEA says the world's supply cushion will grow considerably next year as more production from Africa, the Caspian Sea and the recovering Gulf of Mexico comes on stream.
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