Exxon Mobil shares fell nearly 2% in early trading on Wednesday after the top U.S. oil producer warned of a decline in refining profits in the fourth quarter and weak returns across its operations.

The earnings snapshot from the industry bellwether signaled a challenging environment as companies grapple with pricing pressure amid demand volatility.

Exxon expects fourth-quarter earnings to be lower by about $1.75 billion from the prior quarter.

For much of last year, Exxon and other oil majors faced reduced profitability from refining crude oil and selling petroleum products as a post-pandemic boom in demand ended. The opening of big plants around the world also weighed on refining margins growth.

In the third quarter, Exxon's profits fell 5% than the year-ago quarter, while Chevron's tumbled 21%.

Exxon's earnings update is "consistent with revisions seen for independent refiners and other majors with heavy refining exposure," said Biraj Borkhataria, an oil analyst with RBC Capital Markets, in a note to investors.

The snapshot will likely be viewed as a "negative" and weigh on the shares in the near term, he added.

Exxon is one of the world's largest refiners with a total global refining capacity of 4.5 million barrels of oil per day and is also one of the world's largest manufacturers of commodity and specialty chemicals.

The company is expected to deliver a profit of $1.76 per share in the fourth quarter, according to data compiled by LSEG. The oil major posted earnings of $2.48 per share a year earlier.

Exxon has a price-to-earnings (PE) ratio of 13.56 compared to Chevron's 16.43. A lower PE multiple indicates a more attractive investment opportunity.

Exxon's shares rose 7.6% in 2024, underperforming the S&P 500's 23.3% gain.