Exxon Mobil Corp.’s stock price fell due to a drop in the price of oil, the company’s primary commodity.
Brief Outline
- In the wake of a rate decrease and alarming economic statistics from China, oil prices dropped by almost 4% this morning.
- Shares of several large oil companies, including Exxon (NYSE:XOM), dropped due to the announcement.
- The specialist in oil and gas production posted massive Q2 earnings.
What Happened?
ExxonMobil (NYSE:XOM) shares had a downward trend today as oil prices experienced a steep decline due to fears about a slowdown in China’s economy.
Exxon (NYSE:XOM) stock was trading 3.3% down as of 10:52 a.m. Eastern Standard Time. During the same period, West Texas Intermediate crude oil prices dropped by 3.9%, falling to slightly below $89 per barrel.
Then what?
The People’s Bank of China made an unexpected decrease in the interest rate this morning, hinting that it is concerned about a recession. Additionally, property values dropped for the eleventh month in a row in July. In addition, the expansion of Chinese retail sales slowed down in June, and the jobless rate for young people hit its highest level since 2018; these are all signals that imply China’s economic reopening is failing following stringent lockdowns this spring.
Since China is the largest importer of oil in the world as well as the second-largest consumer of oil after the United States, accounting for around 16% of total global demand, the health of the Chinese economy plays a vital influence in determining the price of oil.
Exxon (NYSE:XOM) does have direct exposure to China; however, this is less important than the price of oil, which is often connected with the health of the global economy; thus, investors should keep a close check on any subsequent economic data coming out of China.
What’s Next for Exxon?
In the second quarter, Exxon’s profits soared to a record-breaking $17.9 billion as a direct result of the meteoric rise in the price of oil; however, this outstanding performance may not be repeated if oil prices continue to fall. Exxon (NYSE:XOM) was one of the numerous energy equities that had declined today, which was no surprise. The Energy Select SPDR Fund (NYSEARCA:XLE), which follows the performance of the energy sector in the S&P 500, saw a loss of 2.5%.
Exxon (NYSE:XOM) is adding 130,000 barrels of oil equivalent per day to its production in Texas’s Permian basin, and the company also increased its refining capacity in the second quarter by 180,000 barrels per day. These actions indicate that Exxon is confident that high oil prices will continue for the foreseeable future.
Even though it now seems more probable that the United States would escape a recession due to a solid employment report and a lowering inflation rate in July, the price of oil may continue to be negatively impacted by problems in China.
Featured Image: Megapixl © Jetcityimage
Author Shariq Khan 
