Topline
Shares of energy giant Exxon Mobil surged to a new all-time high on Wednesday, continuing a stellar run this year on the back of rising oil and gas prices, which analysts warn could remain elevated well into late 2022.
Key Facts
Shares of Exxon Mobil jumped over 1% to a new record high on Wednesday, trading at around $105 per share, as the energy sector continues to outperform the rest of the market on rising oil and gas prices.
Evercore ISI analyst Stephen Richardson upgraded Exxon to a “buy” rating on Tuesday with a price target of $120 per share, arguing that the stock is still trading at a discount and has room to run higher even after surging more than 60% so far this year.
Oil prices continued to rise on Wednesday: The price of U.S. benchmark West Texas Intermediate sits at around $120 per barrel, while international benchmark Brent crude is approaching $122 per barrel.
What’s more, gas prices have also spiked and now sit at nearly $5 per gallon nationally, according to AAA data, with prices averaging well above $5 in over a dozen states.
A host of Wall Street strategists expect oil prices to climb even further, however: Goldman Sachs analysts raised their third quarter forecast to $140 per barrel from $125 per barrel on Tuesday, while Morgan Stanley sees it rising to at least $130 per barrel if not as high as $150 per barrel.
“The oil market is expected to remain tight as the supply side will continue to tell a story of low inventories,” says Edward Moya, senior market analyst for Oanda, who adds, “crude oil inventories will likely post more draws as the driving season and vacationing heats up.”
Crucial Quote:
“A large spike in prices remains quite possible this summer,” Goldman Sachs strategists wrote, warning that gas prices in particular could rise to levels associated with oil trading near $160 per barrel. “We believe oil prices need to rally further to normalize the unsustainably low levels of global oil inventories, as well as OPEC and refining spare capacities,” the firm said.
Key Background:
Oil prices peaked at a nearly 14-year high of $139 per barrel in March, when Russia’s invasion of Ukraine sent global commodities prices surging. While oil has moderated since then, it has remained well above $100 per barrel in recent months—with Wall Street firms calling for a more sustained spike during the second half of 2022 as inflation continues to weigh on consumers and lead to higher prices. Against this backdrop of increased volatility in 2022, the S&P 500 energy sector has been the best-performing area of the market by a long shot so far, rising nearly 60% this year. Other big energy giants like Occidental Petroleum, Marathon Oil and Halliburton have also been top-performers, rising 124%, 90% and 79% so far in 2022, respectively.
Further Reading:
The Economy May Be Slowing, But Recession Fears Are ‘Overblown’ These Experts Argue (Forbes)
Gas Now Tops $5 A Gallon In These 13 States (Forbes)
How Does The Market Perform During An Economic Recession? You May Be Surprised (Forbes)
