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Largest Oil Firms Profited Big in 2018 Despite Falling Oil Prices

This article was originally published on ETFTrends.com.

Large oil firms like Exxon, Chevron and Shell posted their biggest profits in 2018 despite global oil prices falling as much as 38 percent.

According to FactSet data, global crude oil averaged about $71 a barrel in 2018--just over 30 percent lower than in 2014, but the five biggest oil companies--Exxon, Chevron, Shell, BP PLC and France’s Total SA combined--are on track to post $84 billion, which is 13 percent higher versus four years ago when oil sold came in at $100 a barrel.

“These companies have figured out how to operate in this new environment, and they have adjusted well” to lower prices, said Brian Youngberg, an analyst at Edward Jones in St. Louis. “The key going forward will be maintaining discipline. This is now a low-growth industry, so you’ve got to invest well.”

source: tradingeconomics.com

Related: Top 34 Oil ETFs

Oil Has Best January to Date

Oil rose 18 percent this month, which marks its best January performance to date. The surge comes despite weak economic data flowing from China, the world's second largest consumer when it comes to oil.

That performance is reflecting in the United States Oil (USO) ETF, which is up over 17 percent in January through Thursday's close.

U.S. West Texas Intermediate crude prices were at $53.79 a barrel, and posted an 18.5 percent monthly gain for January. This was WTI crude's biggest increase since April 2016 and also its best January since the futures began trading in 1983.

Brent crude is at $61.90 a barrel, which on pace to rise 15 percent in January--its best month since April 2016.

Energy information provider Argus Media, said producer cuts will eventually help level oil prices again as 2019 wears on.

In December, lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut. OPEC and associated partners agreed to cut 1.2 million barrels per day with OPEC being responsible for 800,000 barrels.

The latest production cut came as a surprise to many oil analysts as initial estimates were slated at 1 million barrels per day and 650,000 barrels per day for OPEC. Russia, though a non-OPEC member, has emerged as a major player in the negotiations, particularly when discussions got tense between rivals Saudi Arabia and Iran.

Oil producers will utilize output levels from October as the baseline level for cuts while the final deal will be reviewed in April. Final numbers are still under discussion, but according to a delegate familiar with the deal, Russia proposed a 2 percent reduction using that October output level as the baseline metric--the cut would then be equivalent to 228,000 barrels per day, which exceeds the initial cuts of 150,000 barrels per day.

Since 2016, OPEC's negotiation landscape has changed dramatically with Russia and Saudi Arabia putting aside their differences and now, together, exerting their influence over production discussions.

“The price environment in 2018 was unpredictable, which once again demonstrated the value of our integrated business model,” said Exxon Chief Executive Darren Woods.

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