What happened
Shares of ExxonMobil (XOM -1.89%) rallied as much as 3.1% by 3 p.m. ET on Friday. The primary catalyst fueling the oil stock's rebound was higher crude prices.
So what
After slumping for several days, crude oil prices bounced back on Friday. WTI, the primary U.S. oil price benchmark, was up as much as 3% before notching a 0.3% gain to close at $86.87 per barrel. Meanwhile, Brent, the global crude oil benchmark, closed a bit higher, rising 0.7% to $93.02 per barrel.
Buoying oil prices was the prospect that OPEC might cut its output due to the potential for a demand slowdown as the global economy weakens. Oil traders also looked at the possibility that the Atlantic hurricane season could drive production in the Gulf of Mexico offline, impacting supplies.
The prospect of higher prices would be a boon for ExxonMobil. Exxon produced a prodigious $20 billion of cash flow from operating activities in the second quarter, thanks partly to higher oil prices. While the recent decline in oil prices will likely lead to it producing less cash flow in the second quarter, a rebound in crude would boost its future cash flow.
In other news, after the market closed yesterday, Exxon and its joint venture partner Shell (SHEL -0.99%) announced plans to sell their California oil joint venture. Exxon holds a 48.2% interest in Aera Energy, which it formed with Shell in 1997. They're selling the business to German asset manager IKAV for $4 billion. That puts Exxon a step closer to achieving its target of selling $15 billion of assets while sharpening its focus on its best assets.
Now what
ExxonMobil has been cashing in on higher crude prices this year. They're enabling the company to generate a gusher of cash and get higher prices on non-core assets it's selling. That's providing the oil company with more money to reinvest in its core assets and energy transition initiatives while returning capital to shareholders through a rising dividend and share repurchase program. That combination of business expansion and cash returns makes Exxon a potentially attractive oil stock investment for those who believe crude prices are heading higher.
