Exxon Remains Bullish on Prospects of Rise in Crude Price

Exxon Remains Bullish on Prospects of Rise in Crude Price

The stock of Exxon Mobil Corp (NYSE: XOM), which closed at $89.90 yesterday, is just $5 away from the 12-month high of $95.55. Being a diversified oil and natural gas company, Exxon Mobil was able to manage the low price of crude oil and posted reasonably good results. In the recent quarter, the Texas-based company reported earnings of $2.65 billion or $0.63 per share, on revenues of $58.677 billion. Based on the discussion below, we believe that the company is well positioned to improve its performance in the current quarter.

Following the production cut implemented by OPEC and other oil producing countries, the price of crude oil has broken above the psychological level of $50 per barrel. Analysts anticipate the crude to trade between $55 and $60 during the first-half of 2017. It can be remembered that the price of crude oil dipped to a twelve year low of about $27 per barrel last year. When the price of crude oil increased from $20 to $97, between 2002 and 2008, the free cash flow of Exxon Mobil, devoid of dividends, increased from $3.4 billion to $32 billion. From this data, we can infer that the free cash flow of Exxon will increase in the coming months due to a rise in the price of crude oil.

Earlier this week, the company reported the discovery of a new natural gas field at the North Highlands in Papua New Guinea. Exxon Mobil owns a 42.5% stake in the site covering an area of 126,000 acres. Oil Search and Santos Subsidiary Barracuda Limited, the other two partners in the project, own 37.5% and 20% respectively. Oil Search is the principal operator of the oil field. The company is currently evaluating the drilling results to estimate the reserves.

Another interesting development related to the company is the appointment of Rex Tillerson, former CEO of Exxon Mobil, as the US Secretary of State. To avoid conflict of interest, Tillerson has agreed to sell off nearly 600,000 shares of Exxon Mobil owned by him. On Jan 3rd, Exxon confirmed that Tillerson will also transfer the value of more than 2 million in deferred shares to an independently managed trust. Furthermore, the ex-CEO has also agreed to surrender cash bonus worth more than $4.1 million.

Even though, Tillerson has agreed to sever relationship with Exxon, analysts believe that his decisions would certainly favor the oil industry as a whole. Tillerson is considered to be a close friend of Igor Sechin, the head of Russian oil company Rosneft. It can be noted that Sechin is a former spy of KGB and close aide of President Vladimir Putin. Thus, based on the above details, we anticipate the stock of Exxon Mobil to remain bullish in the short-term.

Technically, the stock is trading above the support level of 87. The MACD histogram has turned positive. This underlines the possibility of another short-term rally in the stock.

Exxon - Technical Analysis - 5th January 2017

So, a trader can look at the possibility of purchasing a high (or above) contract from a suitable binary broker. The purchase can be done after making sure that the price of the underlying stock trades below $90 (as shown on the binary platform) in the equity market. The trader should preferably choose a date around January 12th as the expiry date of the suggested contract.

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