Big Oil Braces for Earnings Amid Trump Tariffs

US oil giants are expected to report potentially shaky results following the drop in crude prices towards the end of last year. However, markets could be more interested in prospects under the new administration as Trump prepares to unleash a flurry of tariffs over the weekend on Mexico and Canada, shaking up the oil markets.

Pricing vs Volumes

It appears markets are bracing for a generally disappointing series of quarterly reports from major oil producers. The previous quarter saw a normalisation in crude prices as well as weaker demand due to slower global economic performance. The expectation seems to be that names like ExxonMobil and Chevron could follow a pattern similar to Shell, which reported earlier this week: Earnings fell dramatically, even below analysts' estimates, but the company raised its dividend in an effort to reassure investors, resulting in a small increase in the stock price after earnings.

Attention has now shifted to the Trump effect, as the 47th President is expected to have a major impact on oil markets. While the war in Ukraine and tensions in the Middle East have been the major catalysts for higher prices over the last couple of years, with a shaky ceasefire in Gaza and Trump vowing to reach some kind of agreement in Ukraine, attention is now shifting to tariffs on Mexico and Canada oil imports. Investors are waiting to see whether Trump includes oil in his tariffs. The Trump administration seems to be pushing to lower the price of crude oil, but it is also fast-tracking new production. The question for investors in oil majors is whether they can make up in volume what they might miss out on in price.

Moving the Majors

ExxonMobil will report earnings on Friday, with the consensus being that EPS will fall to $1.55 per share from $2.48 last year despite sales being expected to increase 3.4% to $87.2 billion. The company already hiked its dividend at the end of last quarter and provided projections for capital spending for this year in line with the prior. The company has been concentrating on the Permian basin in the US, which could give it a potential edge as the Trump White House supports domestic production.

Chevron will also report on Friday and is expected to see its bottom line see a large drop compared to the prior year to $2.11 per share from $3.45, with modest growth in revenue to $48.4 billion, up 2.6% over the last 12 months. The company has a pending merger with Hess, which could get investor attention given the change in regulatory outlook after the last election. The company's exposure to the natural gas market, which has fluctuated substantially recently due to supply concerns in Europe, could also be of interest to investors deciding whether to give the stock a boost.

WTI Flag Breakout?

WTI oil shows a potential bullish flag pattern, suggesting an upside breakout in the coming sessions should $74 give way to bulls. Short-term resistance lies at $75.30, with a stab above $76.10 opening the door to the January peak of $79.40. Meanwhile, if the regional support at $72 and the $70 handle weaken, a move below the $68.50 level might expose the $66.50 mark.

Source: SpreadEx / Light Crude

Key Takeaways

While US oil majors like Exxon and Chevron are expected to report weaker earnings due to lower crude prices, markets will focus on their prospects under President Trump's policies to boost domestic production and whether upcoming tariffs over the weekend include oil. The release of the two earnings reports is unlikely to affect the oil markets, but how the oil markets react on Monday might confirm or validate the post-earnings trend - if one.