The war-fueled oil rally is expected to boost shale profit to the highest level since 2022

?U.S. After the 'Iran war' sent crude prices soaring, analysts expect shale producers to report their highest quarterly?profits in 2022.

ConocoPhillips is expected to report sharply higher earnings in the second quarter after oil prices rose for most of the period, boosting cash flows across the industry.

The conflict, which erupted late in February, has disrupted Middle East oil supplies and shipping along the Strait of Hormuz. About a fifth (25%) of all global oil and natural gas is transported through this waterway. Brent crude went from an average of $69.82 per barrel in January, to $126.41 by April, and WTI, from $65.17, to $109.64.

The expected earnings boost is expected to rival that enjoyed by producers after the Russian invasion of Ukraine 2022.

Analysts say that unlike then, companies are unlikely increase drilling. Instead, they will prioritize dividends, stock buybacks, and balance sheet strength.

Morningstar analyst Joshua Aguilar stated that crude markets may become oversupplied if a resolution is reached in the 'U.S.-Iran Conflict. However, analysts said stronger balance sheets and more disciplined spending leaves shale oil producers better positioned to withstand lower prices than they were in 2022.

Drew Depoe, an Enverus analyst, said that most of the?incremental?cashflow would be returned to investors. Arif Gasilov is a partner at consulting company Gasilov Group and said that producers entered the latest geopolitical crisis with stronger balance sheets than in 2022.

Matthew Bernstein, an analyst at Rystad Energy, said that only Diamondback explicitly attributed higher oil prices to "higher activity".

ExxonMobil and ChevronMobil both posted strong profits in Q2. Exxon, however, missed estimates despite reporting the highest profit it has reported in four years. (Reporting and editing by Maju Sam in Bengaluru, Dharna Baffna from Bengaluru)

(source: Reuters)