Falling oil prices combined with weak refining market conditions pressured overseas giants' H1 2025 performance. In the first half of 2025, the five major international oil companies reported year-over-year declines in operating performance. ExxonMobil, Chevron, Shell, and TotalEnergies recorded net profit attributable to shareholders down 15.3%, 39.7%, 22.9%, and 31.2% respectively year-over-year, while BP's underlying replacement cost profit fell 31.8% year-over-year.

By business segment, overseas oil and gas giants' H1 2025 performance was primarily affected by falling oil prices and weak refining market conditions. (1) H1 2025 Brent crude averaged $70.81/barrel, down 15.1% year-over-year, with Q2 Brent averaging $66.71/barrel, down 21.5% year-over-year. The decline in oil prices significantly impacted upstream segment performance of overseas oil majors. (2) In H1 2025, Shell's refining margins fell 24.4% year-over-year, TotalEnergies' refining margins dropped 44.4%, and BP's refining margins declined 26.2%, reflecting the weak refining market and narrowing profit margins. In North America, ExxonMobil and Chevron's downstream segment operating profits fell 22.3% and 23.0% respectively year-over-year. (3) For natural gas, overseas gas prices rose in H1 2025, with Henry Hub and TTF natural gas prices averaging 66.8% and 38.9% higher year-over-year respectively. However, due to lagged long-term contract price adjustments and declining production, Shell, BP, and TotalEnergies' natural gas businesses failed to achieve positive year-over-year profit growth.

Oil and gas production growth showed divergence, while cost control offset some performance volatility. In H1 2025, the combined oil and gas equivalent production of the five major overseas oil companies increased 2.96% year-over-year, though production growth rates varied significantly among companies. ExxonMobil benefited from rapid production ramp-up in high-quality Guyana oil and gas blocks, achieving crude oil production growth of 15.5% and natural gas production growth of 6.9%, while other overseas majors saw slower oil and gas production growth. On the cost front, ExxonMobil, Chevron, Shell, BP, and TotalEnergies' per-barrel oil and gas costs changed by -4.4, +1.2, -3.9, +3.5, and -2.6 dollars per barrel of oil equivalent respectively year-over-year. Considering combined production and cost changes, companies that controlled per-barrel costs experienced smaller upstream performance declines. ExxonMobil, benefiting from rapid production growth and cost control, saw its H1 2025 upstream segment operating profit decline by only 4.5%, demonstrating earnings resilience.

IEA continues to lower crude oil demand expectations, forecasting OPEC+ production increase of 1.2 million barrels/day in 2025. The IEA released its August 2025 monthly report. On the demand side, IEA revised down 2025-2026 crude oil demand growth expectations by 20,000 barrels/day, projecting global crude oil demand growth of 680,000 barrels/day in 2025 and 700,000 barrels/day in 2026, primarily due to weaker-than-expected oil demand in emerging markets including China, India, and Brazil. In 2025, weak demand from major economies and low consumer confidence make a strong crude oil demand rebound unlikely. Jet fuel demand remains relatively strong, with IEA forecasting 2.1% growth in global jet fuel demand in 2025, though still below 2019 levels. On the supply side, due to continued rapid production increases by OPEC+, IEA raised 2025 global crude oil supply growth by 370,000 barrels/day to 2.5 million barrels/day, and raised 2026 projections by 620,000 barrels/day to 1.9 million barrels/day. Among these, OPEC+ is expected to increase production by 1.2 million barrels/day in 2025, while non-OPEC+ is expected to increase by 1.3 million barrels/day. Looking ahead, despite supply-demand surplus pressuring oil prices, IEA still highlights sanctions risks for Russia and Iran, with geopolitical factors continuing to bring uncertainty to oil prices.

Investment recommendations: Given ongoing geopolitical uncertainties, the medium-to-long-term crude oil supply-demand dynamics still maintain a favorable foundation. From a long-term perspective, we remain firmly optimistic about the "Three Barrels of Oil" and oilfield services sectors. Additionally, macroeconomic recovery will boost chemical demand, and long-term capacity clearing in chemicals benefits leading enterprises. We are optimistic about large-scale refining and petrochemicals, coal chemicals, and ethylene profitability improvements. We recommend attention to: (1) PetroChina (A+H), Sinopec (A+H), CNOOC (A+H); (2) Oilfield services and engineering companies under the "Three Barrels of Oil," including COSL, Offshore Oil Engineering, Offshore Oil Development, CNPC Engineering, Sinopec Oilfield Service, Sinopec Engineering (H-share); (3) Refining and chemical fiber industry chain leaders: Sinopec, Hengli Petrochemical, Rongsheng Petrochemical, Eastern Silk Road, Hengyi Petrochemical, Tongkun Group, Xinfengming; (4) Coal chemical leaders: Baofeng Energy, Hualu-Hengsheng, Yangmei Chemical, China Risun Group, etc.; (5) Ethane-to-ethylene leader: Satellite Chemical.

Risk analysis: Upstream capital expenditure growth below expectations, significant volatility in crude oil and natural gas prices.