Refinery profit margins offset the impact of low oil prices, European energy giant's Q3 earnings show stronger-than-expected resilience.

Thanks to the strong refining profit margin offsetting the impact of low oil prices, European energy companies performed far better than expected in the third quarter, despite uncertain prospects for 2026. Industry research data shows that the MSCI Europe Energy Index achieved a 2.7% earnings per share growth in the third quarter, compared to market expectations of a 6.8% decline; European oil and gas companies also led in terms of earnings exceeding expectations in the third quarter. Although soft oil prices led to energy companies generally falling short of revenue expectations, the improvement in refining profit margins boosted profitability. Analyst Kaidi Meng pointed out that oil giants Shell, BP, and Eni were the main drivers behind the MSCI Europe Energy Index exceeding earnings per share expectations. Despite flat oil trading, BP's third-quarter profit exceeded expectations, enhancing investor confidence in a turnaround. Thanks to strong refining profit margins, its refining and trading division saw profits grow compared to the previous quarter. Driven by strong natural gas trading, increasing liquefied natural gas sales, and improved refining profit margins, Shell's profits and free cash flow in the third quarter also exceeded expectations. This mirrors the situation of its US counterpart Exxon Mobil Corporation, which expects strong fuel production profit margins to increase profits by $3 to $7 billion. Analyst Salih Yilmaz stated that Spanish oil giant Repsol is entering the fourth quarter with positive momentum from its refining business, which helps offset macroeconomic headwinds and weak benchmark oil prices. He added that the refining business will help mitigate the impact of commodity price fluctuations in early 2026. In other European regions, Portugal's largest oil company Galp Energia, TotalEnergies in France, and OMV in Austria also achieved steady profits thanks to their refining businesses. Citigroup analyst Alastair Syme wrote in a report on TotalEnergies: "We believe that the market has yet to fully appreciate the strength of current refining margins." The optimistic news from large European oil companies reassures investors that share buybacks and dividends key factors attracting investors to the industry are still likely to be maintained. Analyst Will Hares noted that Shell's decision to increase investments in oil and gas, while cautiously expanding into renewable energy, is a strategy that is "cautious and is boosting mid-term earnings and shareholder returns." Looking ahead, the oil and gas industry remains vulnerable to further oil price fluctuations. Estimates suggest that for the Stoxx 600 Energy Subindex in 2026, a consensus oil price of around $68 per barrel is expected. If the oil price drops to $60, earnings per share for the entire sector may decrease by around 20%. Alfred Stern, CEO of OMV, stated that the current strong refining profit margins may not last long, as it will return to normal levels and not be sustained at fourth-quarter levels. As of now, the oil and gas industry continues to show steady momentum. The third-quarter earnings of the five supermajor oil giants Exxon Mobil, Shell, TotalEnergies, BP, and Chevron were higher than in the second quarter. However, this level of earnings is still less than half of 2022's earnings, indicating that the road to recovery for the industry is still long.