I covered Chevron CEO Mike Wirth’s stark warning about oil price pressure building through June and July, and the IEA data showing global inventories drawing down at a record pace.
This week, on July 7, ExxonMobil gave investors the first concrete look at what those dynamics are actually worth in dollar terms. The numbers are significant.
According to a Bloomberg report, Exxon (XOM) disclosed on June 7 that it expects a profit increase of approximately $3.7 billion from the crude oil price surge in Q2, plus an additional approximately $3.3 billion in combined refining and chemical margin gains.
Partially offsetting those gains are approximately $1.2 billion in losses from production disruptions in the Middle East caused by the U.S.-Iran war and the closure of the Strait of Hormuz. The company also expects to record approximately $2.6 billion in derivative profits linked to physical cargo deliveries during the quarter, Bloomberg reports.
As of this report, XOM was trading up near $143. The company’s full quarterly results are scheduled for July 31.
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Breaking down what Exxon’s early disclosure actually signals
The preliminary figures Exxon shared are what the company calls “sensitivity” disclosures, not final results. They frame the directional magnitude of Q2 earnings relative to Q1, and that direction is clearly and materially upward.
My read of the moving pieces is this. The approximately $3.7 billion crude price benefit reflects higher average oil prices in Q2 than in Q1, driven by disruptions to Middle East production via the Strait of Hormuz.
The approximately $3.3 billion in refining and chemical gains reflects improved crack spreads globally as refinery throughputs were constrained by the shortage of Middle Eastern crude, pushing product prices higher.
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The approximately $1.2 billion loss from disruptions in Middle East production is the offset. Exxon has assets in the region that produced less during the quarter, as a result of the conflict.
But the net math is strongly positive: a nearly $7 billion gross positive swing, partially offset by $1.2 billion in direct production losses plus the $2.6 billion derivative gain.
That derivative position is worth pausing on. In Q1 2026, Exxon reported $3.9 billion in unfavorable estimated timing effects from derivatives marked to market, with the associated physical deliveries not yet completed.
CEO Darren Woods addressed this directly in the Q1 earnings call, noting those timing effects “unwind in subsequent periods.” The $2.6 billion derivative profit in Q2 guidance is partly that unwinding.
The Q1 2026 foundation and what Woods said about Exxon’s structural strength
Exxon’s Q1 2026 results, reported May 1, provided the baseline against which the Q2 improvement should be measured, according to Exxon’s earnings release.
- Excluding identified items and timing effects, underlying earnings were $8.8 billion, up from $7.6 billion in the same quarter last year.
- Generated a one-year total shareholder return of 48% and $9.2 billion in shareholder distributions, delivered record production in Guyana, and achieved first LNG at Golden Pass Train 1.
Woods was direct about what the Middle East disruption revealed about the company’s structural positioning.
This quarter demonstrated that ExxonMobil is a fundamentally stronger company than it was just a few years ago, built to perform through disruption and across market cycles.
Woods continued in the Q1 earnings release. “The underlying business delivered strong results, reflecting the benefits of the strategy we have consistently executed since 2018.”
The Q2 setup Exxon has framed supports that thesis. Higher oil prices, improved refining margins, and derivative profits are converging simultaneously.
All of that comes in a quarter; the company’s production base outside the Middle East is also expected to increase approximately 150,000 oil-equivalent barrels per day compared to Q1, according to Exxon’s forward guidance presentation.
Benjamin Fanjoy/Bloomberg via Getty Images
What the analyst community sees in XOM heading into July 31
The energy sector earnings revision story has been one of the most dramatic in the market this quarter, honestly.
According to FactSet data as of July 2, the energy sector has recorded the largest percentage increase in estimated earnings of all 11 S&P 500 sectors since March 31, rising 49.8% to $52.1 billion.
The sector’s estimated year-over-year earnings growth rate has moved from 48.3% at quarter start to 122.1% today.
Related: Bank of America sees Exxon differently than oil market
Exxon’s EPS estimate has risen to $3.63 from $2.42 since March 31, according to FactSet, making it one of the largest dollar contributors to the sector’s earnings upgrade alongside Chevron, Marathon Petroleum, and ConocoPhillips.
Despite that earnings upgrade, the energy sector has seen the largest price decline of all eleven sectors since March 31, falling 14.5%, according to the same note.
XOM itself is up 19.64% year-to-date, according to Yahoo Finance, but is pricing in considerable uncertainty about whether the Strait of Hormuz will reopen by the timeline peace negotiators are projecting.
Analyst targets across the Street reflect a wide range of views.
- Wells Fargo holds the street-high target at $185
- Barclays and Bernstein are both at $182.
- JPMorgan sits at $173.
- Morgan Stanley at $168.
- TD Cowen lowered its target to $155 on July 2.
- Bank of America carries a $154 target.
Source: TipRanks
The spread from $154 to $185 is a genuine disagreement about how quickly Hormuz reopens, how long elevated oil and refining margins persist, and whether Exxon can translate a war-driven windfall into durable earnings power. July 31 will start answering those questions.
Related: Oil’s 4-month low hands Exxon, Chevron a fresh problem
