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Exxon Mobil reaches bottom of the oil barrel

Exxon Mobil has reached the bottom of the oil barrel. The US energy goliath reported a 63 per cent fall in first-quarter profit on Friday. Rivals Chevron and ConocoPhillips were hurting, too, as crude fell below $30 in January before investment cuts helped ease the excess supply and push up the price of oil. Recovery will be slow and patchy, but the worst is probably past.

Cost cuts helped Exxon surprise Wall Street, but the $1.8 billion in net earnings was the company's lowest quarterly sum since 1999. Chevron, meanwhile, reported its second consecutive loss as crude prices averaged about $34 a barrel from the start of the year through the end of March. And Conoco's net loss of $1.5 billion was twice as big as Chevron's.

There are reasons to start thinking the only direction from here is up. Brent crude already has recovered from its January nadir to $48 a barrel. What's more, unlike last year's brief surge back above $60, this latest uptick has a better chance of sticking.

Saudi Arabia keeps pumping, but two years of less spending on exploration across the sector is taking its toll. US crude production this month slipped below nine million barrels a day for the first time since late 2014. That's a notable drop from the weekly high of over 9.5 million barrels last July.

Big producers also have adjusted their business models to withstand low prices, even as smaller producers with weaker balance sheets struggle to survive. Along with cutting capital spending by more than a quarter since 2014, with further reductions likely this year, the industry has killed projects, axed buybacks and fired workers. In Conoco's case, even the sacred dividend was slashed.

Investors have been anticipating a rebound. Before the Friday earnings reports, Exxon and Chevron shares had gained a respective 20 per cent and 30 per cent from their January lows. Conoco's are up 50 per cent since mid-February.

The rally may not be sustainable. Iran's return to the global crude market and a potential recovery in shale production - if prices continue to rise steadily - could yet prove impediments. For Big Oil, however, the barrel is at least now only half empty.