What happened

Shares of ExxonMobil (XOM 0.28%) were pulling back today as oil prices fell sharply on concerns about a slowdown in China's economy.

As of 10:52 a.m. ET, Exxon stock was down 3.3%. At the same time, West Texas Intermediate oil prices were down 3.9% to just below $89. 

So what

China's central bank issued a surprise interest rate cut this morning, a sign it's worried about a recession, and home prices fell for the 11th month in a row in July. Additionally, Chinese retail sales growth slowed in June, and youth unemployment reached its highest level since 2018 -- all signs that show China's economic reopening faltering after strict lockdowns this spring.

China is the world's biggest importer of oil and the second-biggest consumer after the U.S., making up about 16% of global demand, so the strength of the Chinese economy plays an important role in the price of oil.

While Exxon does have direct exposure to China, that matters less than the price of oil, which is generally correlated with the strength of the global economy, so investors should keep their eye on further economic reports out of China.

Now what

Exxon's earnings boomed in the second quarter, reaching $17.9 billion as oil prices skyrocketed, but the impressive performance may not repeat if oil prices continue to pull back. Not surprisingly, Exxon was one of several oil stocks to fall today. The Energy Select SPDR Fund (XLE -0.20%), which tracks the S&P 500 energy sector, was down 2.5%. 

Exxon is boosting production in Texas' Permian basin, adding 130,000 barrels of oil equivalent per day, and it also stepped up refining capacity in Q2 by 180,000 barrels per day, indicating confidence that oil prices will remain elevated. 

While the U.S. seems more likely to avoid a recession after a strong jobs report and a declining inflation rate in July, troubles in China could continue to weigh on the price of oil.