OPINION: The oil and gas sector looks to be back in business, with some roaring profits and talk of a commodity “super cycle”.

Total and ExxonMobil have led the way, with Total reporting adjusted net income of $3 billion for the first quarter and ExxonMobil posting a $2.7 billion net profit.

Amid improved oil demand and global trade, their stock prices have recovered as well — up by around 56% for Total and an 88% gain for ExxonMobil as of Tuesday, compared with their late-October lows.

The rollout of vaccines and lessening of lockdowns has helped to lift Brent crude futures above $68 per barrel.

Even plant shutdowns during the winter storms in Texas and a continuing squeeze on refinery margins failed to dent ExxonMobil results.

Back to business as usual?

So is it back to business as usual for the historically swaggering ExxonMobil? Well, not quite.

Profits have risen partly because of more cautious capital spending.

ExxonMobil, which was slow to embrace climate action, also launched a new low-carbon division this year.

The US supermajor is still carrying a heady total debt level of $63 billion, even after wiping $4 billion in the last three months.

The company will need to loosen the purse strings if it is to carry out plans for a big expansion in profitable production sweet spots such as Guyana.

But its $2.7 billion quarterly profit figure certainly is a welcome turnaround from the $610 million loss in the same quarter last year.

And there is now talk of the oil industry taking part in a wider commodity "super cycle" developing on the back of global economic optimism, low US interest rates and a shortage of minerals and materials due to lower production rates during the downturn.

Transition pressures remain

The danger now is that ExxonMobil and others begin to feast on higher crude prices and forget capital discipline and the energy transition.

The oil majors can argue they need to pay out healthy dividends or buy back shares to bring back investors.

They can also claim they need to make money from oil and gas to invest in renewables or other low-carbon businesses.

But ExxonMobil remains under pressure from activist hedge fund Engine No. 1, which, supported by other major shareholders, is pressing for more low-carbon change at the oil major.

Other companies also are coming under pressure to accelerate their transitions.

The wider political environment in the US has changed, with President Joe Biden replacing climate sceptic Donald Trump at the White House.

The new government has made clear in its first 100 days it will push hard on its low-carbon energy programme.

Investors' views

Meanwhile, many big investors are unconvinced the oil industry is serious about curbing carbon emissions.

A survey of 64 institutional investors with almost $11 trillion in assets found only 17% believe oil companies will change to focus on green energy, the Financial Times reported.

Against that are others who might say investors talk of climate change but still expect big financial returns from oil.

The public pressure is more profound for European oil companies such as Shell, Eni and BP, which have responded by proclaiming they are transitioning to cleaner energy.

All have reported big swings from financial loss to profit, with Shell immediately increasing its dividend payments.

Oil majors' share values show a steady recovery, but most remain well below their pre-pandemic levels.

A current ExxonMobil market capitalisation of around $250 billion compares with $644 billion at Tesla, which some see as a proxy for the low-carbon economy.

The oil industry is back from the dead financially, but the struggle for capital and credibility remain live issues.

(This is an Upstream opinion article.)