Exxon Mobil's Stock Price is at the Mercy of Oil Prices

John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Exxon Mobil (NYSE: XOM) has been pushing against that ‘87‘resistance level since early January no less than 10 times but just cannot find the strength to push through. The company has fared well than some of its rivals by maintaining a high price. This as compared to ConocoPhilip (NYSE: COP) that has dropped about 8% in the last 6 weeks. This is due in part to the price of oil going down. Considering ConocoPhilips also spun off its exploration company and is a pure oil and natural gas producer, Exxon has fared much better.

What will it take for Exxon to push through that 87 level? The company has a lot of potential. We do know that the company is joining forces with the Russian company Rosneft to explore for oil in Russia’s arctic and Black Sea regions. Sinking about $500 billion into the project together over time, they have estimated the reserve they found in the Black Sea has 9 billion barrels. Unfortunately, it will be a few years before any gain is seen from that venture. 2018 is the earliest oil will be seen from these sites.

It is likely that future projects are not going to raise Exxon's stock. Instead, Exxon’s stock price will be influenced by the price of oil, so where is oil going this year?

Short Term Oil Prices

Short term, EIA has lowered the forecast 2012 average U.S. refiner acquisition cost of crude oil by $2 per barrel from last month’s Outlook to $112 per barrel, still $10 per barrel higher than last year’s average price. Oil prices dropped after the government said U.S. supplies grew more than expected last week. U.S. crude supplies grew by 3.8 million barrels recently while analysts expected the growth to be 400,000 barrels. Motorists are not filling up as expected. Gas is likely to rise to around $4 per gallon during the next few weeks as more refiners switch to producing summer blends of fuel.

Long Term Oil Prices

Long term, oil prices are expected to climb. Shell Oil CEO Peter Voser says oil's long-term price trend will only go in one direction, and that’s up. Mobil Corp is cutting its long-term production forecast due to higher oil prices. Exxon Mobil Chief Executive Rex Tillerson said the company estimates its total oil-and-gas production in 2014 will be up 2% to 3% from 2009, instead of its previous estimate of an increase of 4% to 5% over the period. It also expects crude prices to remain high for the next few years to come.

Exxon Mobil will be pushing up through that resistance level until oil prices go back up again, which could be down the road according to forecasts. Since short-term oil prices will be held back by a combination of less usage and production cut backs, it does not look like an increase will take place before the third quarter of 2012. It is after this time that we may see enough revenue increase that Exxon may be able to push through that barrier it continues to struggle with.


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