Exxon Mobil Corporation (XOM.US) warned: The oil and gas price drop may lead to a $1.5 billion decrease in Q2 profits.

Global energy giant Exxon Mobil Corporation recently stated that due to the drastic fluctuations in commodity prices, the continuous decrease in oil and gas prices will result in a decrease of approximately $1.5 billion in its second quarter profit compared to the first quarter. The company, headquartered in Spring, Texas, noted in a statement released on Monday that the decrease in oil prices led to a profit reduction of around $1 billion, while the lower natural gas prices caused an additional loss of $500 million in revenue. Similarly, its European competitor Shell (SHEL.US) also saw its stock price drop by 3.3% on Monday after announcing that its quarterly trading earnings would be "significantly lower" than expected. The profit warnings of these two energy giants reflect the overall weakness in the industry. Energy companies that significantly increased dividends and stock buybacks after record profits in 2022 are now facing the dilemma of struggling to cover expenses with free cash flow. The trade war initiated by U.S. President Trump, combined with OPEC and its allies' plans for higher-than-expected production, continue to suppress oil prices, while the military actions of the U.S. and Israel against Iran only brought brief market boosts. Exxon Mobil Corporation stated that an expected recovery in refinery profit margins is projected to contribute approximately $300 million to quarterly profits. The company emphasized that this guidance only reflects market price changes and does not take into account factors such as production adjustments or changes in operating costs. Biraj Borkhataria, a capital markets analyst at Royal Bank of Canada, stated in a research report that Exxon Mobil Corporation's forecast aligns "completely" with analysts' expectations for the second quarter. Borkhataria also noted that compared to its European counterpart Shell, Exxon Mobil Corporation's trading operations are much smaller and therefore not affected by similar issues.