What happened

Shares of big oil stock ExxonMobil (XOM -2.78%) rode a wave of higher oil prices to a 2.3% gain in mid-afternoon trading today, as of 2:05 p.m. ET. Both American West Texas Intermediate and Brent crude -- the international benchmark -- are trading higher this afternoon, up past $80 and $84 a barrel, respectively.  

So what

What's pushing oil prices higher? The laws of supply and demand, that's what.

As OilPrice.com reported this morning, China "likely tapped its crude inventories in July." (It's only "likely" because China does not publicly report on the status of its oil inventories.) But it's also likely because China increased oil refining activity by 17.4% last month on stronger demand for gasoline and other fuels.  

Meanwhile, just yesterday OilPrice reported that U.S. crude inventories declined by 6 million barrels last week, after declining by 5.9 million barrels the week before, and 17 million barrels the week before that.  

Now what

What all this adds up to (or perhaps, subtracts down to) is a smaller supply of oil available for refining amid apparently strong demand for the stuff in the world's two largest economies -- and that's good news for ExxonMobil stock.

Similarly for ExxonMobil investors, the news looks pretty good right now. Exxon stock is trading for about 8.5 times trailing earnings -- about one-third the average valuation of stocks on the S&P 500. It's also paying a strong 3.3% dividend yield -- nearly twice the payout rate of other stocks on the S&P.    

Granted, worries of an impending recession have analysts downbeat on Exxon's prospects for profits, and the company's forward P/E ratio is a bit higher than its trailing number in consequence -- about 11.7x earnings. But even so, that's not an expensive price by any means. And with demand for oil apparently still going strong, you kind of have to wonder if fears of the forecast recession are perhaps starting to look overblown right now.

In that case, Exxon's profits may not actually drop very much next year -- and ExxonMobil stock could be a very good buy.