Shares of U.S. energy giant ExxonMobil (XOM -0.85%) rose a touch over 5% at one point in morning trading on Thursday. Although it pulled back from that level in early afternoon action, the stock was still up by around 4% at 1 p.m. EDT today. There was no material company news, but the broader energy market and a mention in The Wall Street Journal provided some notable support to the shares.
The headlines over the last few days have been focused on Exxon potentially losing its throne as the largest U.S. energy company to peer Chevron and/or utility and renewable power giant NextEra Energy. To put some numbers on that, Exxon's market cap has declined from a peak of around $450 billion in 2014 to a recent level of around $147 billion. Although still quite large, that's pretty much neck and neck with Chevron and NextEra.
While investors contemplate the bragging rights of being the "biggest" energy company, Exxon remains a dominant oil business. And one that has decided to double down on oil despite low prices and the increasing shift away from carbon-based energy options. Like its peers, it has pulled back on investment in the face of low energy prices, but it has not shifted its dedication to oil and the various products derived from it.
In fact, this oil focus got a positive mention in the Journal, which suggested that rising oil prices could benefit Exxon and its sizable chemicals business more than its peers. And, as if on cue, West Texas Intermediate oil prices have risen above the important $40 per barrel level, below which few companies can profitably drill. Notably, U.S. onshore is one of the key focus areas for Exxon as it looks to ramp up its production over time. The company's shares likely got a bit of a lift from both the Journal article and the positive oil price movement.
Exxon's stock has been hit hard by falling energy prices, pushing its yield above 10%. There are very legitimate concerns among investors that it won't be able to maintain its dividend at the current level if industry conditions don't improve. But if oil prices can mount a sustained rally, those concerns would ease considerably. One day's move and one positive news article don't change the big picture here, but investors can't be blamed for being excited by some positive news after so many negatives.
And yet the only thing that investors can truly expect with any certainty from here is continued volatility in the energy patch. Indeed, tomorrow could just as easily add to today's early gains as completely reverse them. Conservative long-term investors might want to tread carefully.