A volatile oil market could be the best opportunity Exxon Mobil (NYSE:XOM) has had in more than a decade.
But it certainly doesn’t look that way now.
Oil, like other commodities, is being . Most analysts are now , citing a slowing global economy and rising supplies from the U.S. and elsewhere.
But all this could reverse quickly. The U.S. and Iran are making war-like noises at each other. Iran is threatening to for the first time in decades. Trump is talking about opening the strategic oil reserve to .
As oil again becomes a key to global economics, there is one company with the flexibility to ride volatility to guaranteed profits, and that’s Exxon. It’s the ultimate oil hedge for small investors.
What You Get
Even if I’m completely wrong here and the oil market goes nowhere, Exxon Mobil makes money.
The company is due to report earnings before trading opens July 27, with the consensus being $1.23 per share of earnings, about $5.2 billion, on $71.01 billion of revenue and a “whisper number” of .
Exxon is paying , which it can easily afford, a yield of 3.96% at the July 23 opening price of $81.40. The company also had $8.5 billion in operating cash flow during the quarter and, unlike most oil companies, has a fortress balance sheet, with just $19.4 billion in long-term debt on $348 billion of assets.
In short, Exxon Mobil is a fine income investment in normal times. The only question is whether it can deliver a capital gain.
Most of the time the answer is no. Exxon has traded sideways since the 2008 financial crisis, although it never once reduced that dividend during the crisis. It’s a solid income stream in a volatile world.
What Could Happen
What makes Exxon Mobil interesting is that it has a huge international network that can arbitrage for better prices at every step of oil production,
Exxon has operations on every continent, , and has been aggressively It is also the largest oil refiner, processing
While Trump has been jawboning for lower oil prices, even the industry admits he has been doing so inartfully. What he seems to want is for Saudi Arabia to increase production and cut Iran from the market. But the Saud family What he’s doing is pushing prices .
Exxon Mobil’s global refining network can also take advantage of the in the U.S. Should the trade war hit oil trading, Exxon is already its international trade unit.
The Bottom Line on XOM Stock
Most analysts expect Exxon stock to go nowhere. If it does, you’re in good shape as an income investor, collecting a competitive dividend of 4%.
But there is growing uncertainty at every stage of the oil business. U.S. production has been constrained by a in the Permian. America’s refining capacity is International tensions are rising, and the International Energy Agency considers current investment
When there’s in the oil business, Exxon can mitigate it. But there’s always a price, and Exxon knows how to extract that price.
Exxon can thus be your own hedge against oil or gas supply disruption anywhere in the world, and they’ll pay you 4% on your money to play.
is a financial and technology journalist. He is the author of the historical mystery romance , available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at . As of this writing he owned no shares in companies mentioned in this article.
