What Transpired
Today witnessed significant gains for ExxonMobil and Chevron's stock prices, observing notable upward surges.
The escalating oil prices stirred up energy sector bulls on a Monday. Two of the sector's heavyweights, ExxonMobil (1.71% increase in XOM) and Chevron (1.24% rise in CVX), profited from this trend. Their stock prices surged by 3%, outperforming the minimal (0.2%) hike of the S&P 500 index.
So What's Going On
Oil prices aren't the only influencers in the sector, but they play a significant role. Consequently, investors flooded into oil-related stocks when prices touched a three-month high on Monday. To top it off, July marked the largest monthly increase (more than 1%) since the year began in 2022.
ExxonMobil and Chevron are prominent global energy players, and their stocks are frequently the center of attention when oil prices fluctuate dramatically.
As expected, a decline in supply is driving their growth. According to Reuters' survey, Saudi Arabia, the world's top oil producer, experienced a decrease in production by 860,000 barrels per day (bpd) in July. Similarly, OPEC's production also decreased by 840,000 bpd during the same period. Adding to the supply-side pressure, the U.S. also started refilling its Strategic Petroleum Reserve.
What's Next
Many industry analysts believe that the tight supply situation will persist. They foresee that Saudi Arabia may prolong its monthly output cut of 1 million bpd, and that the current petroleum demand will remain robust.
Investors are drawn to oil-related stocks due to the significant impact of oil prices, as observed when prices touched a three-month high, resulting in a surge in the stock prices of companies like ExxonMobil and Chevron. This rise in their stock prices was further fueled by a decline in supply, with Saudi Arabia and OPEC reducing production by an combined 1.7 million barrels per day in July. With this tight supply situation anticipated to continue, some analysts predict that Saudi Arabia might extend its monthly output cut and that the current petroleum demand will remain robust, potentially offering opportunities for those engaged in financing and investing in these energy stocks.
