What happened
Shares of ExxonMobil (XOM +0.33%) were down by around 5% as of 10:30 a.m. ET on Monday. Several factors are weighing on the oil stock, including slightly lower crude prices, a steep sell-off in the stock market, and some criticism of the company from President Biden late last week.
So what
Oil prices were taking a breather Monday morning. West Texas Intermediate, the U.S. benchmark crude variety, was down more than 2% in morning trading, falling below $118 a barrel.
Several factors are weighing on the price of oil. Chinese authorities said this weekend that they will conduct mass COVID-19 testing in Beijing following an outbreak tied to a nightclub, and China had already begun mass testing in Shanghai, the nation's commercial hub. This has led some to expect that the world's second-largest oil consumer might institute a new series of pandemic lockdowns, which could reduce global demand for oil.
Meanwhile, the persistence of high U.S. inflation has many investors concerned that the Federal Reserve will raise interest rates even more quickly than expected. But if the Fed taps the brakes on the economy too hard, it could cause a recession, which likewise would lead to a drop in oil demand. Those concerns are also weighing on the broader stock market Monday.
NYSE: XOM
Key Data Points
Lower oil prices would cut into ExxonMobil's profits, which explains why its stock is sinking. The company's current high profits drew criticism from President Biden on Friday. The president specifically called out the oil company as being partly to blame for today's high gasoline prices, and said that "Exxon made more money than God last year."
That statement was a bit of a stretch. While ExxonMobil made a lot of money in 2021 and is on track to make even more this year, it's not the most profitable company in the country. Apple, Microsoft, Alphabet, and JP Morgan Chase will make more money than ExxonMobil this year.
The president also criticized the company for using its windfall profits on stock buybacks rather than investing in producing more oil to help meet high demand. While ExxonMobil is returning a lot of money to investors through dividends and share buybacks, it intends to invest $21 billion to $24 billion on capital projects in 2022. It's spending 50% more to produce oil and gas from its U.S. operations in the Permian Basin and increasing its ability to refine oil into gasoline and other refined products by more than 250,000 barrels per day this year.
Now what
Shares of ExxonMobil are under pressure Monday both because oil prices were slipping and due to President Biden's rebuke. His criticism has investors more worried that Washington might impose a windfall profit tax on the oil industry, and they may also fear that ExxonMobil will be pressured into investing in new oil production that might not earn as attractive returns. Those risks could weigh on the stock in the near term, especially when coupled with the potential for slackening demand if the economy slips into a recession.
