J.P. Morgan: ExxonMobil’s third-quarter refining profit doubles as chemicals and upstream come under pressure

What drove third-quarter profit?

In the third quarter of 2026, ExxonMobil’s adjusted energy products profit reached $9.05 billion, more than double the $4.1 billion recorded in the second quarter. About 10% of global refining capacity was offline, and the benchmark refining margin rose from $29 per barrel in the second quarter to $50.3.
Over the same period, the average Brent crude price fell $7.51 quarter on quarter to $97.01 per barrel, while refining margins rose markedly. JPMorgan believes the current constraint is concentrated in refining capacity rather than crude supply.
The company’s CEO believes restrictions on Middle Eastern refined-product shipments, attacks on Russian refineries and idle capacity in China combined to tighten supply, and that refining capacity may not return to normal until later in 2027.

ExxonMobil has invested about $17 billion in building and upgrading refining facilities since 2019. Management said diesel yield had risen about 3.5% from 2019, generating about $1.5 billion in incremental profit in the third quarter of 2026 and about $3.5 billion cumulatively in the first three quarters.
After stripping out the effect of throughput above the year-to-date average, JPMorgan estimates that the company still captured about $300 million more in the third quarter than implied by refining benchmarks, which it believes reflects optimization and trading capabilities.
The company plans to increase distillate output by about 100 thousand barrels per day through upgrades at its US Gulf Coast refineries; management estimates that expanding existing facilities costs about half as much as a new-build project.

Adjusted chemical products profit fell from $1.214 billion in the second quarter to $725 million in the third. North American polyethylene prices fell from $1454 to $998 per tonne, while US Gulf Coast ethane prices rose from $158 to $180 per tonne, compressing the spread between product and feedstock prices.
Although chemical sales volumes rose from 4.471 million tonnes to 4.888 million tonnes, JPMorgan’s model does not assume a margin recovery in the fourth quarter.
Adjusted upstream profit fell from $9.189 billion in the second quarter to $7.308 billion in the third, mainly due to lower realized prices and reduced advantaged production; the impact on Middle Eastern production was unchanged quarter on quarter. Total third-quarter production was 4.496 million barrels of oil equivalent per day, broadly flat against 4.514 million in the second quarter.

Third-quarter free cash flow was $19.1 billion, exceeding JPMorgan’s and market expectations by 37% and 26%, respectively, but was driven largely by a release of working capital; excluding the working capital impact, it was $16.9 billion, only 2.7% above the bank’s forecast.
The company raised its quarterly base dividend by 4% to $1.07 per share and set a $20 billion buyback target for 2027. The bank estimates full-year dividends and buybacks combined at about $37.5 billion; free cash flow for the first three quarters of 2026 was $39 billion, and net debt fell to $22.1 billion at the end of the third quarter.

The bank raised its refining margin assumptions for the first half of 2027 while lowering its chemical margin assumptions, and incorporated a Middle Eastern production impact of about 350 thousand barrels of oil equivalent per day in its fourth-quarter model.
JPMorgan raised its 2026 adjusted earnings-per-share forecast from $14.11 to $14.54 and lowered its 2027 forecast from $13.97 to $13.78. The bank maintained its Overweight rating and raised its price target for December 2027 from $186 to $199 because of higher commodity price assumptions; its valuation uses a ratio of forecast 2028 free cash flow to enterprise value of about 6.25%.