Oil price & Stocks cont'd to Rise, post War?
What a difference a day makes.
On Mon, 30 Sep 2024 US market performance was still a mixed bag, with
Residual positive sentiments from last Friday’s falling PCE inflation data and
Fed’s Chairman, Mr Powell’s speech at at the Nashville’s National Association for Business Economists conference, perceived to be a market dampener.
On Tue, 01 Oct 2024, things took a turn for the worst around 12:20pm ET, after Iran fired over 100 ballistic missiles at Israel.
By the time market closed for the day: (see above)
DJIA: -0.41% (-173.18 to 42,156.97).
S&P 500: -0.93% (-53.73 to 5,708.75).
Nasdaq: -1.53% (-278.81 to 17,910.36).
In my last post (click here ! to read & help to repost (ok)), I have shared how US jobs reports will affect US stock market:
Starting with JOLTs on Tuesday.
Ending with US Non-farm payroll (NFP) on Friday, albeit the “most watchover” jobs report.
It is still unclear (to me) whether the two US economic reports (see below) out on Tuesday managed to buffer the impact from the fallout of the war in the Middle East between Iran and Israel :
US jobs opening and labour turnover surveys (JOLTs).
US PMI manufacturing.
(1) US Jobs Opening & Labour Turnover survey (JOLTs). [Strong]
US job openings unexpectedly increased by 329,000 to 8.040 million in August 2024 after two consecutive month of decreases. There were 1.13 job openings for every unemployed person in August compared to 1.08 in July.
However, hiring was soft, falling by -99,000 to 5.317 million. This is consistent with a slowing labour market that is keeping the Fed on track to cut interest rates in November, for the 2nd time.
Report also showed layoffs declining. Layoffs decrease 105,000 to 1.608 million.
Lastly, resignations dropped 159,000 to 3.084 million, the lowest level since August 2020.
That pushed the quits rates to a 4-year low of 1.9% from July’s 2.0%, that should help to curb wage inflation.
(2) US Manufacturing PMI. [OK]
The Institute for Supply Management's (ISM) manufacturing purchasing managers' index (PMI) came in at 47.2 for September 2024.
It is “lower” than Wall Street’s estimates of 47.6 and remained unchanged from August’s data.
By PMI standards, a reading below 50 denotes contraction.
Bank of America’s analysts commented that latest PMI data suggest that broader economic activity in the US is "cooling, not crumbling."
In the midst of a tumbling US market on Tuesday, there was a bright spark - oil prices jumped amid speculation about how Israel and the US may respond to Iran’s move.
At first glance, oil stock like $Exxon Mobil(XOM)$ seemed to have benefitted from the Middle East war. (see below)
However, on closer investigation there were other factors. (see below)
(1) Strategic Investment in Nigeria:
On 30 Sep 2024, ExxonMobil announced a significant $10 billion investment in Nigeria’s offshore oil operations. This move is expected to enhance their production capabilities and strengthen their presence in the region.
(2) LNG Terminal Access in Guangdong:
On Fri, 27 Sep 2024, the company secured a 20-year access agreement to Guangdong Energy’s LNG terminal. This deal is anticipated to boost Exxon’s LNG supply chain and expand its market reach in Asia.
(3) Positive Analyst Ratings:
Several analysts upgraded their ratings for ExxonMobil, citing the company’s strong financial performance and strategic initiatives.
Latest ratings:
26 Sep 2024. $Wells Fargo(WFC)$ maintained a “Buy”.
25 Sep 2024. $Morgan Stanley(MS)$ maintains a “Buy”.
The positive sentiments among analysts likely contributed to the stock price increase.
Yesterday’s warring conflict between Iran & Israel has indeed influenced the rise in ExxonMobil’s stock price.
Here’s how it has impacted the energy market:
(4) Oil Supply Concerns:
The conflict has heightened concerns about potential disruptions in oil supply from the Middle East, a region critical to global oil production.
This uncertainty often leads to higher oil prices, benefiting companies like ExxonMobil.
(5) Increased Demand for Energy Security:
Geopolitical instability tends to drive countries to secure their energy supplies more aggressively. This increased demand can boost the business prospects of major energy companies.
(6) Investor Sentiment:
Investors often seek safe havens during geopolitical tensions.
Established energy companies with strong global operations, like ExxonMobil, are seen as more stable investments, leading to increased stock prices.
These factors, combined with the other catalysts mentioned earlier, have contributed to the rise in ExxonMobil’s stock price.
The war is making it hard to predict what will happen to energy prices. An OPEC meeting today (Wednesday) will probably talk about this as the war is a threat to energy supplies worldwide.
With so much going for in the energy sector. the question to internalize - Is ExxonMobil a buy ?
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Do you think it is a prudent move to invest in “Energy-oil” stock in the midst of a turmoil?
Do you think ExxonMobil will be a better investment than $Chevron(CVX)$ or $Occidental(OXY)$ ?
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