v3.26.1
Financial and Derivative Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial and Derivative Instruments Financial and Derivative Instruments
The company primarily uses commodity derivative instruments to manage commodity price risk related to physical hydrocarbon shipments. The company’s commodity derivative instruments principally include crude oil, natural gas, liquefied natural gas and refined product futures, swaps, options and forward contracts.
The company uses commodity derivative instruments traded on the New York Mercantile Exchange and on electronic platforms of the Inter-Continental Exchange and Chicago Mercantile Exchange. In addition, the company enters into swap contracts and option contracts principally with major financial institutions and other oil and gas companies in the “over-the-counter” markets, which are governed by International Swaps and Derivatives Association agreements and other master netting arrangements.
Although, historically, the company’s derivative instruments have not been material to its consolidated financial position, results of operations or liquidity, heightened volatility in commodity prices associated with the ongoing conflict in the Middle East resulted in significant mark-to-market earnings losses and margin-related cash outflows. The company actively manages market and liquidity risks and has sufficient liquidity to meet collateral requirements, which are generally short-term in nature.
Additionally, the company applies cash flow hedge accounting on a limited basis to derivative commodity transactions used to manage the market price risk associated with certain forecasted sales of crude oil. The company performs regression analysis periodically to help ensure that the month-over-month changes in the specified component in the physical sales contracts are highly correlated with changes in the index futures prices.
Derivative instruments measured at fair value at March 31, 2026, and December 31, 2025, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:
Consolidated Balance Sheet: Fair Value of Derivatives
Type ofAt March 31,
2026		At December 31,
2025
ContractBalance Sheet Classification(Millions of dollars)
CommodityAccounts and notes receivable, net$1 $191 
CommodityLong-term receivables, net23 73 
Total Assets at Fair Value
$24 $264 
CommodityAccounts payable$44 $60 
CommodityDeferred credits and other noncurrent obligations5 8 
Total Liabilities at Fair Value
$49 $68 
Consolidated Statement of Income: The Effect of Derivatives
 Gain / (Loss)
Three Months Ended
March 31
Type of20262025
ContractStatement of Income Classification(Millions of dollars)
CommoditySales and other operating revenues$(2,967)$(144)
CommodityPurchased crude oil and products(144)(44)
CommodityOther income (loss)(1)(6)
Total$(3,112)$(194)

The amount reclassified from AOCL to “Sales and other operating revenues” from designated hedges for the first quarter of 2026 was a gain of $10 million compared with a loss of $17 million in the same period of the prior year. At March 31, 2026, before-tax deferred losses in AOCL related to outstanding crude oil price hedging contracts were $153 million, of which all is expected to be reclassified into earnings during the next 12 months as the hedged crude oil sales are recognized in earnings.
The following table represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at March 31, 2026, and December 31, 2025.
Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities
 Gross Amounts RecognizedGross Amounts OffsetNet Amounts Presented Gross Amounts Not OffsetNet Amount
At March 31, 2026(Millions of dollars)
Derivative Assets - not designated$697 $673 $24 $— $24 
Derivative Assets - designated$— $— $— $— $— 
Derivative Liabilities - not designated$722 $673 $49 $— $49 
Derivative Liabilities - designated$— $— $— $— $— 
At December 31, 2025
Derivative Assets - not designated$2,525 $2,271 $254 $1 $253 
Derivative Assets - designated$11 $1 $10 $— $10 
Derivative Liabilities - not designated$2,339 $2,271 $68 $3 $65 
Derivative Liabilities - designated$1 $1 $— $— $— 
Derivative assets and liabilities are classified on the Consolidated Balance Sheet as “Accounts and notes receivable”, “Long-term receivables”, “Accounts payable”, and “Deferred credits and other noncurrent obligations”. Gross Amounts Not Offset in the table above represent derivative mark-to-market positions that do not meet all the conditions for “a right of offset.”
At March 31, 2026, the company had $870 million of margin calls under master netting arrangements not offset against the derivatives on the Consolidated Balance Sheet, primarily related to initial margin requirements. The respective balance at December 31, 2025, was approximately zero.
The company’s net short position in outstanding commodity derivative contracts was approximately 40 million and 29 million barrels of oil-equivalent at March 31, 2026, and December 31, 2025, respectively, primarily to manage certain price risks related to physical shipments of crude oil and refined products.