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Exxonmobil - Booming Energy Sector

Towards the end of both 2020 and 2021 the technology sector saw a large boom as company profits increased significantly. The NASDAQ increased by 31% in 2021 and by 145% over the space of 18 months. However, this year the technology sector has taken a large hit and chunks have been bitten off from stock prices.

On the other hand, the energy sector has seen strong price movements amongst a generally declining stock market. Amongst the market leaders in the oil and gas sector is Exxonmobil which is also the sector's largest company.

Exxonmobil’s stock has increased in value by 3.4% over the past week, 13.25% over the past month, and 54% this year so far. The price of the stock is at its highest since 2014, having closed at $97.84 in the latest trading session. The price movement is specifically impressive when compared with the stock performance of other market competitors. For example, the 5 largest US companies have all seen their stocks decline this year so far.

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Exxonmobil’s Latest Developments

The imposition of a possible partial ban on Russian oil supplies to the EU countries and the reopening of Shanghai enterprises after a long coronavirus quarantine boosted global demand for oil and petroleum products. This improved the company's profit prospects for the new quarter, which are already predicted to be higher than the year’s first quarter. The predicted Earnings per Share (EPS) for the second quarter stands at $2.76, that is a 25% increase from the first quarter and more than double that of 12 months ago.

The consumption of gasoline is also growing in the US, according to reports, due to the summer car season beginning. According to the latest data from the American Petroleum Institute, energy reserves in the US declined by 1.18 million barrels ove the past week.

Market demand will likely continue to grow if the economy continues to expand, and leading manufacturers will not be able to meet it promptly. Additionally, countries within the OPEC organisation are in no rush to increase production sharply, staying loyal to the previous plan for a gradual increase in production capacity. They are expected to approve an increase of only 432,000 barrels per day at today's meeting. Thus, the current situation in the global energy market could allow investors of ExxonMobil to hope for a serious increase in dividends this year. An increase in dividends could also have the ability to increase the demand amongst investors looking to hold stocks in the longer term.

Stock Price Risks

Risks to the price of the stock can be looked at from the technical analysis view or through fundamental analysis. From the perspective of technical analysis, the price has reached a significant point of collapse when looking at the price action of the past 10 years. In addition to this, the stock could run the risk of losing demand as the price increases.

On the other hand, from the perspective of fundamental analysis, the risks of a recession deepen in investors' minds. Especially after a top Moody economist advised that there is a 1 in 3 chance of witnessing a recession this year, and a 50% chance in 2023. A recession could cause a decline not only in company profits and investors' risk appetite, but also in the demand for petrol, gas and diesel which is Exxonmobil’s main source of income. However, this is yet to materialise hence the influence may not yet be reflected on the price of the stock.

Lastly, traders should also keep in mind the correlation which the performance of the company and its stock has with the current turbulent oil market.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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