An Exxon refinery in Baton Rouge, Louisiana

Exxon and Chevron discussed merging the oil companies last year, a move that would have likely created the second-largest oil company in the world, The Wall Street Journal reported Sunday.

The talks between Chevron CEO Mike Wirth and Exxon CEO Darren Woods took place in the early days of the coronavirus pandemic, which battered the oil sector, the Journal reported, citing a source familiar with the matter. The talks were preliminary and are not ongoing, though the two CEOs might resume discussions, the Journal said.

If the merger were to occur, it would likely make the ensuing firm the second-largest oil company in the world by market capitalization and production, the Journal said. Saudi Aramco is the world's largest oil company.

The companies did not immediately respond to Insider's requests for comment. 

The oil industry has been hit hard by the pandemic, with reduced travel drastically cutting demand for jet fuel, diesel, and gasoline. Oil prices have rebounded this year after a brutal spring 2020 in which US crude fell into negative territory for the first time. 

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Exxon, the largest US oil producer, has faced pressure from a number of events, including its ousting from the Dow Jones Industrial Average in August and a reported SEC investigation into allegations the company overvalued a key oil and gas property in Texas' Permian Basin. It also posted losses in the first three quarters of 2020; fourth quarter results will be revealed on Tuesday. 

Chevron has also been hammered by the decline in demand for crude oil. Late last year, the second-largest US oil producer took steps to reduce costs and streamline operations. It also asked employees worldwide to reapply for positions, Reuters reported. Last week the company reported a fourth quarter loss. 

Exxon and Chevron have market capitalizations of $190 billion and $164 billion, respectively. 

Last week, S&P Global Ratings put several big oil companies, including Chevron and Exxon, on notice that it could soon downgrade their credit ratings due to heightened concerns about climate change and a global push towards greener energy.

The agency - one of the three most influential ratings firms in the world - said it could ultimately downgrade the ratings of Chevron, Exxon, Shell and Total among others.

The Journal noted that the proposed merger between Chevron and ExxonMobil would bring back together two of the companies borne after John D. Rockefeller's Standard Oil monopoly was broken up in 1911.

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