By 3 p.m. ET on Friday, ExxonMobil (NYSE: XOM) stock had risen as much as 3.1%. Higher crude prices were the main factor driving the recovery of oil stocks.
Crude oil prices rose on Friday after falling for many days. The main U.S. oil price benchmark, WTI, increased by as high as 3% before closing at $86.87 per barrel with a 0.3% gain. In the meantime, Brent, the international benchmark for crude oil, closed marginally higher, up 0.7% to $93.02 per barrel.
The likelihood that OPEC would reduce its output in response to the possibility of a slowdown in demand as the global economy deteriorates helped to raise oil prices. The danger that the Atlantic hurricane season could shut down Gulf of Mexico production and affect supplies was also taken into consideration by oil merchants.
For ExxonMobil, the likelihood of increased prices would be advantageous. Due in part to rising oil prices, Exxon generated a staggering $20 billion in cash flow from operating activities in the second quarter. It would probably generate less cash flow in the second quarter as a result of the current drop in oil prices, but a rise in crude would increase its cash flow in the future.
In other news, Exxon and its joint venture partner Shell (NYSE: SHEL) revealed plans to sell their joint venture for California oil after the market closed yesterday. Exxon has a 48.2% stake in Aera Energy, a company it co-founded in 1997 alongside Shell. For $4 billion, they are selling the company to German asset management IKAV.
This advances Exxon's goal of selling $15 billion worth of assets while narrowing its attention to its strongest assets.
This year, ExxonMobil has benefited from rising crude prices. They help the business produce a flood of cash and sell non-core assets for greater prices.
In addition to returning capital to shareholders through an increasing dividend and share repurchase programme, this will give the oil business greater funds to reinvest in its core assets and energy transition efforts.