What happened

ExxonMobil (XOM -0.72%) shares closed out last week on a down note, as investors digested the details of the oil giant's latest "five-year plan": paying down debt, buying back stock, and allowing profits and cash flow to fall well below 2022 levels. Exxon's starting out this week on an up note, however, as its share price rises 1.9% in late-morning trading at 11:50 a.m. EST.

You can thank the oil market for that.

So what

Oil prices popped Monday morning, with the cost of a barrel of WTI crude up 3.4% at $73.40 and Brent crude, the international benchmark, rising 2.8% to $78.19. Pricier oil means more profits for Exxon, and it makes sense that a higher oil price would translate into a higher price for Exxon stock.  

It seems supply uncertainty is what's buoying oil prices this morning -- as opposed to worries over demand destruction from an approaching recession that depressed prices last week. As OilPrice.com explains, OPEC+ countries produced only 38.3 million barrels of crude in November -- less than the 40.1 million barrels that they were permitted to produce under the cartel's quota. At the same time, last week saw the introduction of a new "price cap" on exports of Russian crude oil, prompting Russian threats to potentially produce less oil in response to the cap.  

Now what

Lower supply, given constant demand, implies that oil prices could be heading higher in the new year. But don't obsess too much over this risk. As we saw last week, "constant demand" isn't really a given. There's just as much chance that weak demand during a recession, combined with weak supply from producers, will cancel each other out, resulting in little change to long-term oil prices.

Given how difficult it is to predict the future, investors are best advised to focus instead on what we know for certain about the present. And in the case of ExxonMobil stock, what we know is that:

  • The stock costs only 8.5 times trailing-12-month profits (versus a 20.6x average P/E ratio for the S&P 500).
  • Exxon's stock pays its shareholders a better-than-average 3.5% dividend yield.
  • And while Exxon carries a seemingly large amount of debt -- $15 billion net of cash -- relative to the stock's $420 billion-plus market capitalization, Exxon's debt load actually isn't very big at all.

All of these factors, I believe, make ExxonMobil stock a very tempting target for investment.