Financial and Derivative Instruments

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The company’s commodity derivative instruments principally include crude oil, natural gas and refined product futures, swaps, options and forward contracts. The company applies cash flow hedge accounting to certain commodity transactions, where appropriate, to manage the market price risk associated with forecasted sales of crude oil. The company’s derivatives are not material to the company’s consolidated financial position, results of operations or liquidity. The company believes it has no material market or credit risks to its operations, financial position or liquidity as a result of its commodities and other derivatives activities.

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.

Derivative instruments measured at fair value at March 31, 2021, and December 31, 2020, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:


Consolidated Balance Sheet: Fair Value of Derivatives (Millions of dollars)
Type of Contract	Balance Sheet Classification	At March 31, 2021		At December 31, 2020
Commodity	Accounts and notes receivable, net	$	47	$	73
Commodity	Long-term receivables, net	4		1
Total Assets at Fair Value		$	51	$	74
Commodity	Accounts payable	$	131	$	172
Commodity	Deferred credits and other noncurrent obligations	2		1
Total Liabilities at Fair Value		$	133	$	173


Consolidated Statement of Income: The Effect of Derivatives (Millions of dollars)
Type of		Gain / (Loss) Three Months Ended March 31
Contract	Statement of Income Classification		2021		2020
Commodity	Sales and other operating revenues		$	(274)	$	461
Commodity	Purchased crude oil and products		(3)		(4)
Commodity	Other income		(39)		—
			$	(316)	$	457

All designated cash flow hedges in the first three months of 2021 were settled by March 31, 2021. The impact on sales and other operating revenues from designated hedges for the reporting period was immaterial.

The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at March 31, 2021, and December 31, 2020.


Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities (Millions of dollars)
	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Gross Amounts Not Offset		Net Amount
At March 31, 2021
Derivative Assets - not designated	$	1,186	$	1,135	$	51	$	—	$	51
Derivative Liabilities - not designated	$	1,268	$	1,135	$	133	$	—	$	133
At December 31, 2020
Derivative Assets - not designated	$	818	$	744	$	74	$	—	$	74
Derivative Liabilities - not designated	$	917	$	744	$	173	$	—	$	173

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. Amounts not offset on the Consolidated Balance Sheet represent positions that do not meet all the conditions for “a right of offset”