Chevron Corporation (CVX), Royal Dutch Shell plc (ADR) (RDS.A): Will Oil Break the $100 Mark?

Despite the recent rally in oil prices, the average price in the first quarter of 2013 was 8.3% lower than the same quarter in 2012. The sharp fall oil prices in Q1 2013 may have been among the key factors for the drop in the revenue at these leading oil producers.

Chevron Corporation (NYSE:CVX)’s revenue fell in the first quarter of 2013 by 6.4% (y-o-y). Its oil production declined by 1.9% as it reached approximately 1.7 million bbl/d, compared to 1.8 million bbl/d in the year ago period. Further, the company’s refinery input tumbled by 18.2% in the recent quarter. The drop in refinery input was from the U.S segment, which fell by 38%. The slowdown in production and refinery input pulled down the company’s revenue. If this trend continues, Chevron Corporation (NYSE:CVX)’s revenue will fall further.

Shares of Royal Dutch Shell plc (ADR) (NYSE:RDS.A) rose by 7.2% in the past month. But Shell’s revenue also declined during the past quarter, falling by 5.9%. One of the reasons for the drop in revenue was the 7% drop in the realized price of oil during the quarter (y-o-y).

In terms of production, the company’s upstream oil production declined by nearly 2% (y-o-y). On the other hand, its downstream refinery input rose by 4%; Shell’s oil production increased slightly by 1% compared to the same quarter in 2012. Shell, much like Chevron Corporation (NYSE:CVX), suffered from the decline in oil prices.

Demand

From the demand side, the U.S economy is showing signs of slowdown. The manufacturing PMI slipped again to 50.7, which means manufacturing sectors in the U.S are still growing, but at a slower pace. China’s April manufacturing PMI also declined, dropping to 50.6. If growth in these leading countries’ manufacturing sectors slows further, it could indicate a slowdown in growth for oil consumption. Furthermore, based on the recent IEA report, global demand in the first quarter of 2013 was lower than expected. If this trend continues, oil prices may come down.

The bottom line

Based on the above, my guess is that oil prices will slowly decline in the near future. This will lead to lower profit margins and no revenue growth for leading oil producers.

The article Will Oil Break the $100 Mark? originally appeared on Fool.com and is written by Lior Cohen.

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