What happened
Shares of Exxon Mobil (XOM +3.36%) were falling 2.8% at 10:58 a.m. Friday after pricing for West Texas Intermediate (WTI) tumbled as inventories of crude oil rose and the economic outlook became dicier.
Higher-than-expected economic metrics, such as the Producer Price Index, raised the specter of the Federal Reserve continuing its aggressive policy of raising interest rates, which could push the economy into a recession. The pending release of more oil from the Strategic Petroleum Reserve (SPR) and higher-than-anticipated inventories pushed WTI prices down to about $75 per barrel, a 3.5% decline from yesterday.
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So what
Rising inventories hint at a lack of demand, even as the International Energy Agency forecasts demand will actually hit record levels this year primarily due to China's voracious appetite. The country is expected to account for half of all global demand for oil.
NYSE: XOM
Key Data Points
Also, the Department of Energy is scheduled to release up to 26 million barrels of oil from the SPR, the world's largest supply of emergency crude oil. While the current release is mandated by law, it will still pressure prices lower. Over the past year there has been an unprecedented release of oil reserves to combat high energy prices.
Now what
A wobbly economy and depressed oil pricing trends are bound to cause the stocks of oil giants like Exxon to trade lower. While most of Exxon's revenue is realized from international operations, it still has significant production and refining operations in the U.S. to feel the effects of domestic policy decisions.
