Chevron's commodity derivatives swung from a $3.1 billion loss in the first quarter to a $368 million gain in the second, a reversal the company attributed to heightened volatility during the Iran war.
The hedge that wasn't
Chevron holds a net short position in commodity derivatives, meaning it profits when oil prices fall. Brent crude averaged $81 a barrel in the first quarter and surged to $92 in the second, up 33 percent from about $60 at the start of the year. Prices spiked above $100 in March and April before dropping to about $73 in time for the earnings window, turning a paper loss into a paper gain.
Margin calls retreat
The filing shows margin calls posted as cash collateral fell to $139 million by June 30 from $870 million three months earlier, a cash recovery that coincided with the decline in oil prices from their March highs. A footnote in the derivatives section said heightened volatility associated with the ongoing conflict in the Middle East created large losses and forced the company to pay out cash to cover its trading accounts.
The profit picture
Net income came in at $12.1 billion for the quarter, far above the $2.5 billion reported in the same period last year. The company said the figure was driven by increased production volumes and the Iran war, which sent commodity prices higher. Shares traded up 1.4 percent to around $188 on Thursday afternoon.
Political crossfire
President Trump has blasted Chevron and Exxon for making too much money amid the Iran war, threatening to have the companies give some of that back to the public without elaborating on how. Phillips 66, meanwhile, said it became the third-largest buyer of Venezuelan crude, benefiting from maritime trading exemptions doled out by the Trump administration, and was excluded from the president's scrutiny this week.