Exxon Mobil and Chevron recently experienced a significant decline in their stock prices following a brief surge attributed to the Iran conflict. As of June 28, West Texas Intermediate crude oil fell to around $69 per barrel, its lowest point since late February, coinciding with increased tanker traffic through the Strait of Hormuz and Saudi Arabia’s resumption of oil shipments from its Ras Tanura terminal. This situation indicates that major Gulf oil producers are accelerating output, leading Brent crude prices to drop over 10%, marking a notable weekly decline.
Both companies are now facing second-quarter earnings that are projected to differ significantly from earlier expectations. Exxon Mobil’s stock price has decreased approximately 23% from its 52-week high of $176.41, settling at $136.12. Similarly, Chevron’s stock has dropped about 21% from its peak of $214.71 to $169.13. In addition, General License X, issued by the U.S. Treasury’s Office of Foreign Assets Control, allows for unlimited purchases of Iranian crude, further contributing to the decline in oil prices.
Despite a revenue increase in the first quarter for Exxon at $85.14 billion, both companies reported substantial decreases in net income due to previous financial hedging that locked in lower prices. As oil supply continues to rise, including potential changes in OPEC production quotas, both Exxon and Chevron’s second-quarter results will heavily rely on current market prices rather than previous hedged rates.
Looking ahead, energy investors are paying close attention to the dividend commitments of both companies. Exxon pays $1.03 per share quarterly, while Chevron’s payout is $1.78 per share, with both companies aiming to sustain shareholder value despite market fluctuations.
Why this story matters
- The decline in oil prices has significant implications for the financial health of major oil companies and possibly the broader market.
Key takeaway
- Both Exxon Mobil and Chevron are facing challenges in their second-quarter earnings as market conditions shift rapidly, impacting projected profits.
Opposing viewpoint
- Some analysts believe that despite current downturns, the energy sector may stabilize and recover as geopolitical tensions and demand fluctuate.
