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Should You Buy the Dip in Exxon Mobil?

Stock MarketsDec 02, 2021 11:30AM ET
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© Reuters. Should You Buy the Dip in Exxon Mobil?

Exxon Mobil’s (XOM) shares have gained in price significantly over the past year, favored by the industry’s tailwinds. But the stock has slumped 8.9% over the past month. The company delivered a solid third-quarter earnings report, reversing its pandemic period losses. However, the newly identified omicron variant of COVID-19 could threaten global oil demand. So, will XOM shares soar in price, or will they retreat further? Keep reading to learn our view.The Irving, Tex.-based oil giant Exxon Mobil Corporation (NYSE:XOM) explores and produces crude oil and natural gas in the United States and internationally. XOM shares gained 45.1% in price year-to-date to close yesterday’s trading session at $59.79. However, the stock has declined 8.9% over the past month and 2.4% over the past five days. XOM is currently trading above its 200-day moving average but below its 50-day moving average.

Recently, the company unveiled plans to increase its spending on low-carbon projects and to meet its greenhouse gas emission reduction target by the end of this year, nearly four years ahead of its previous forecast. XOM intends to keep its annual capital spending between $20 billion - $25 billion through 2027. The company expects this spending boost to enable it to generate double-digit returns even if oil prices fall to as low as $35 a barrel.

However, the newly identified COVID-19 variant, omicron, is raising concerns. Oil prices fell substantially on December 1, after confirmation of an omicron case in the U.S. Both Brent and WTI front-month contracts in November posted their steepest monthly falls in percentage terms since March 2020, down 16% and 21%, respectively. XOM declined marginally intraday in the trading session on Dec1. If worries regarding the potential for the omicron variant to slow economic activity and thereby cut oil demand intensifies, XOM shares could retreat further.

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Should You Buy the Dip in Exxon Mobil?
 

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