Exxon Mobil Corp XOM shares are trading lower by 2.68% to $120.76 Tuesday afternoon. Shares of energy stocks are trading lower as oil prices fall after Israel reportedly indicated it could target military sites in Iran but not oil or nuclear targets.
What’s Happening: West Texas Intermediate (WTI) crude, the U.S. oil benchmark, plunged more than 5% to $70 per barrel following reports that Israeli Prime Minister Benjamin Netanyahu had assured the Biden administration that Israel would refrain from targeting Iran’s oil infrastructure in potential military strikes.
This announcement calmed fears of oil supply disruption due to Middle Eastern conflict.
For ExxonMobil, the drop in crude prices spells immediate concerns for its profitability, particularly in upstream operations, where the company generates revenue from oil exploration and production.
As one of the world’s largest integrated oil and gas companies, ExxonMobil's performance is closely tied to the price of crude. A 5% decline in oil prices can significantly reduce the margins in its upstream segment, affecting cash flow and earnings potential.
What Else: In recent months, market concerns had been heightened over the risk of escalating geopolitical tensions in the Middle East, with investors pricing in the possibility of crude prices spiking if Iranian oil infrastructure were targeted.
Analysts had warned that an Israeli strike on Iran could lead to a $20 per barrel increase in crude prices, triggering global supply disruptions. However, Netanyahu's reassurance of a more controlled military approach eased those fears, leading to a steep correction in oil prices.
This sharp decline in oil prices also hits ExxonMobil's refining and downstream operations. While lower crude prices can sometimes boost profit margins for refining as input costs fall, the broader energy market slump signals a more significant pressure on overall demand and investor sentiment.
Additionally, oilfield services tied to ExxonMobil’s production activities are also likely to face setbacks, particularly in a volatile price environment, further weighing on the company's stock performance.
How To Buy XOM Stock
Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in Exxon Mobil’s case, it is in the Energy sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
According to data from Benzinga Pro, XOM has a 52-week high of $126.34 and a 52-week low of $95.77.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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