Exxon Mobil, one of the world's leading oil and gas companies, has issued a warning about its expected fourth-quarter earnings, signaling a challenging period ahead. The company anticipates a decline in earnings by approximately $1.75 billion from the previous quarter, primarily due to a squeeze on refining margins and weaker performance across its operations. This news led to a nearly 2% drop in Exxon's shares during early trading on Wednesday, reflecting investor concerns over the company's profitability in the face of market volatility and pricing pressures.

The oil giant's earnings snapshot revealed that the fourth quarter would be marked by lower refining profits, a trend that has been affecting the industry as a whole. Exxon's refining capacity, which stands at 4.5 million barrels of oil per day, has been impacted by the opening of new plants globally, contributing to a surplus in refining capacity and subsequently lower margins. The company also faced challenges from reduced demand for fuels and excess supply from new refineries in Asia and Africa, which came online in 2024.

Exxon's third-quarter profits had already shown a 5% decline compared to the same period in the previous year, while its competitor Chevron experienced a more significant drop of 21%. The fourth-quarter outlook is even more concerning, with Exxon expecting to post a profit of $1.76 per share, down from $2.48 per share in the same quarter of the previous year. This forecast is well below consensus estimates, prompting analysts to revise their earnings projections downward.

Analysts from Mizuho and UBS have weighed in on Exxon's situation. Mizuho's Nitin Kumar noted that weaknesses in upstream liquids pricing, energy products margins, and chemicals margins are weighing on results. He adjusted his fourth-quarter earnings-per-share estimate to $1.55, maintaining a Neutral rating on Exxon stock with a price target of $134. UBS, on the other hand, anticipates fourth-quarter earnings per share of $1.79 and maintains a Buy rating with a price target of $147, suggesting that factors like growing upstream volumes and cost reduction efforts could provide some upside.

Despite the immediate challenges, Exxon remains focused on long-term growth. The company plans to increase its production by 18% by 2030, aiming for 5.4 million barrels daily, driven by higher output in the Permian Basin and Guyana. This strategic focus on increasing production could help mitigate the impact of current market conditions and position Exxon for future growth.

As Exxon navigates these turbulent waters, investors and analysts will be closely watching the company's final earnings report on January 31, 2025, for further insights into its performance and strategic direction.