Just over a year ago, I wrote a piece suggesting that energy investors should rethink their view of the big, integrated multinational oil firms. The Chevron (CVX)s and Exxon (XOM)s of this world, I argued then, would likely be held back for a while by the very thing that had benefited them for so long, their international exposure. That, however, doesn’t mean that they should be ignored completely. Even if their role as “safe” investments is under pressure, there are still opportunities for short-term gains in big oil, and the biggest of them all, Exxon Mobil, is a case in point right now.
There are both technical and fundamental reasons to believe that XOM, an underperformer even in the generally underperforming energy sector, is about to reverse that trend. Let’s start with the fundamentals, as those influences are more impactful and longer-lasting.
International exposure had become a drag on Exxon because global growth was under pressure. China was slowing and feeling the effects of the trade war and Europe was moribund at best. The U.S. economy, meanwhile, was easily outpacing those of other developed nations. With phase one of a trade deal agreed on and Europe beginning to pick up now though, those factors will weigh less.
In addition, the spread between the global Brent benchmark and the American WTI has started to increase over the last few weeks and looks set to continue to do so. It is now clear that the OPEC+ output limits…