According to the Financial Intelligence APP, Exxon Mobil (XOM.US) and Chevron (CVX.US) have both announced a significant increase in fossil fuel production, bringing the earnings season to a close for large oil companies. Meanwhile, OPEC and its allies are about to increase crude oil supply to the global market.

The production growth of American oil giants is benefiting from record oil production in the Permian Basin, with analysts continuing to be surprised by the year-on-year growth and efficiency improvements in the basin. Driven by the $60 billion acquisition of Pioneer Natural Resources, Exxon Mobil's oil and gas production increased by 24% year-on-year, while Chevron's production grew by 7%.

It's not just American oil companies achieving production growth. Shell (SHEL.US) and BP (BP.US) have also seen increases in production by 4% and 2% respectively, even though their net zero targets are more aggressive than their American competitors.

All of this is happening against the backdrop of weakening oil price prospects. Due to weak demand, oil prices have fallen by about 12% in the past six months. If OPEC+ resumes the previously reduced production as planned, oil prices could further decline.

This moment is in stark contrast to a few years ago when executives worked to control capital expenditure during the pandemic and faced pressure from environmental, social, and governance movements to invest in low-carbon alternatives to fossil fuels. The success of the former and the failure of the latter have led the oil and gas industry to reach a consensus around a common global strategy: oil and gas prices are cheap enough to withstand any energy transition.

Analyst Nick Hummel from Edward D. Jones & Co in St. Louis said, "Exxon Mobil and Chevron are expanding some of the world's best assets while still sticking to their core oil and gas strategy. The short-term outlook for oil and gas feels weak, especially with OPEC preparing to put more oil on the market."

Exxon Mobil is a typical example of a strategic shift, the company lost to the ESG investment institution Engine No.1 in a shareholder battle in 2021.

Chief Financial Officer Kathy Mikells said in an interview that since 2019, even with stable oil prices, acquisitions, divestments, cost reductions, and efficiency improvements have doubled the barrel oil profit margin of this oil giant.

Meanwhile, despite a 50% reduction in capital expenditures, Chevron has increased its oil & gas production by 27% compared to ten years ago. This is largely due to the significant investment in the currently operating Australian natural gas project, but also attributed to efficiency improvements and a shift to the Permian Basin. Chevron has doubled its production in the basin over the past five years, currently returning record levels of cash to shareholders.

Chevron CEO Mike Wirth stated in an interview, "We are improving the efficiency of everything we do. Every dollar we spend gets us more."

The growth in U.S. oil production – currently about 50% higher than Saudi Arabia – is helping OPEC prevent millions of barrels of crude oil from entering the market. Analysts at Macquarie stated in a report that this oil, combined with new supplies from Guyana, Brazil, and elsewhere, could mean 5 million barrels of daily capacity "will be available by 2025, which is currently not yet in production." They noted that this is happening against a backdrop of "relatively weak" demand growth.

The bank expects that unless there is a significant geopolitical event, the Brent crude oil price will drop from the current around $73 per barrel to below $70.

The drop in oil prices is putting pressure on oil giants' ability to pay dividends and buy back stocks. BP Plc's stock price plummeted this week, with the company indicating a potential reduction in buybacks next year if oil prices continue to fall. However, Exxon Mobil, Chevron, and Shell remain confident in weathering this storm.

Exxon Mobil's projects in Guyana and the Permian currently represent about one-fourth of the total production, with crude oil extraction costs below $35 per barrel, meaning they should remain profitable even in potential downturns.

Mikells said: "The fundamental transformation of our business gives us a strong foundation in any market environment, especially in the case of a weak market environment."