Exxon Mobil Stock Under Pressure on Oil Prices Dilemma

The Exxon Mobil (NYSE: XOM) stock price continues to see large price swings as oil producers are taking a long time to reach a consensus over oil production levels.

Oil prices are trading in a $20 range despite president Trump’s mediation between Saudi Arabia and Russia. President Trump expects both countries to cut their combined production by up to 15m barrels a day to help stabilize the oil price.  

Oil executives are meeting with President Trump tomorrow, all while, as @IHSMarkit‘s Dan Yergin said, the President is performing “divorce mediation” between Russia & Saudi Arabia. @KellyCNBC speaks with Dan and @SullyCNBC about the crude crisis on @CNBC. pic.twitter.com/EH2q6NKxje

— The Exchange (@CNBCTheExchange) April 2, 2020

Donald Trump also hinted at taking necessary actions to help oil producers in stabilizing markets.

“If I have to do tariffs on oil coming from outside or if I have to do something to protect our… tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do,” President Trump said.

Iraq’s oil minister has said that oil producers outside the OPEC group including the U.S., Canada, and Norway, should make production cuts to balance supply and demand dynamics.

The Exxon stock price and its financial performance is directly correlated to oil prices. Exxon stock has plunged close to 50% this year on oil price volatility. The shares are currently trading around $40 – down significantly from a 52-week high of $83 a share.

While Exxon has announced asset sales and Capex cuts, so far it plans to sustain its dividend despite market volatility.

The majority of US producers including Exxon need oil prices around $50 a barrel for a breakeven level. Consequently, the majority of oil companies are set to post big losses for the second quarter. 

Credit rating agencies have also been showing concerns over the liquidity situation of oil producers. S&P has dropped Exxon’s credit rating to AA from AA+ previously with a negative outlook. S&P have said, “Cash flow and leverage measures for Exxon have fallen well below S&P’s expectations, and they’re expected to remain weak for the next couple of years.”