ExxonMobil Stands Firm as U.S. Oil Prices Plunge

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

ExxonMobil (NYSE: XOM  ) is up today despite West Texas Intermediate crude-oil prices falling 1.5% to $93.16. The basic-materials sector as a whole is down 0.5%. As of 1:30 p.m. EST, the S&P 500 (SNPINDEX: ^GSPC  ) is down a negligible 0.08%, while the largest exchange-traded fund tracking the S&P 500, the SPDR S&P 500 (NYSEMKT: SPY  ) , is down 0.09%.

Exxon sells oil around the world, and its results are not tied to U.S. oil prices like those of many smaller producers, which is one theory as to why it's up today. Another possibility is that investors have finally had a chance to digest Exxon's earnings from last week, which showed that the company increased production year over year for the first time in two years.

U.S. oil prices continue to diverge from the rest of the world as domestic stockpiles grow amid a slowly growing economy with limited export options, weighing on the price of U.S. crude. WTI crude is now at $93.16, down 15% from a high of nearly $110 hit in early September. The international oil price, Brent crude, is down 10% in the same period to $105.70.

The spread between the two has widened significantly since nearly closing this summer. This graph is current as of last week:

WTI Crude Oil Spot Price Chart

WTI Crude Oil Spot Price data by YCharts.

Tomorrow the Energy Information Administration releases its Weekly Petroleum Status Report, which analysts expect will show a 2.1 million-barrel rise in crude stockpiles, excluding the strategic petroleum reserve. U.S. crude stockpiles currently are at 10-year seasonal highs and are less than 18 million barrels away from an all-time high.

Prices will likely continue to fall as growth slows around the world and supplies increase. Currently, world oil supplies are being affected by disruptions in Libya and Iraq, as well as the continued sanctions against Iran. As those end and more supply comes into the oil market, expect to see prices drop. Anything can happen, though, and a disruption somewhere else could easily send oil prices skyrocketing once more.

Falling crude prices are bad news for oil majors, which have to sell at reduced margins. If prices take a steep drop, it would hit producers operating in Canadian tar sands and U.S. shale, as their costs are very high compared to traditional sources around the world.

However, this is good news for U.S. consumers, who can expect to see increased savings at the pump.

Source: GasBuddy.com.

OPEC's Worst Nightmare
While many oil companies will be hurt by declining prices, there's one company that will make money no matter which way oil prices go. This company rents a very specific and valuable piece of machinery for $41,000 -- per hour . And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling "OPEC's Worst Nightmare." Just click here to uncover the name of this industry-leading stock and join Buffett in his quest for a veritable LANDSLIDE of profits!


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2713735, ~/Articles/ArticleHandler.aspx, 10/1/2014 12:10:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement