Global oil giants ExxonMobil and Chevron have struggled to keep pace with the broader market, despite China’s recent stimulus efforts and interest rate cuts. The S&P 500 has surged 34.3% over the past year, while ExxonMobil and Chevron have lagged behind. One major factor contributing to their sluggish performance is the reduced demand for oil from a struggling China.
However, the market’s focus on supply rather than demand might be masking the potential benefits of China’s stimulus package. The Organization of Petroleum Exporting Countries (OPEC) and its allies hold significant sway over global oil production, and any policy changes they make can have a profound impact on the market. With OPEC+ considering increasing production, oil prices have dipped, putting pressure on companies that took on debt to accelerate production growth or made large acquisitions.
ExxonMobil and Chevron, on the other hand, have demonstrated financial discipline in recent years, improving their balance sheets and diversifying their portfolios. They have sizable refining businesses, low-carbon fuels segments, and geographically diverse upstream portfolios, making them less vulnerable to fluctuations in oil and gas prices. Both companies also boast stable and growing dividend payments, with ExxonMobil touting 42 consecutive years of dividend increases and Chevron yielding 4.5%.
Despite the challenges facing the energy sector, ExxonMobil and Chevron are well-positioned to weather the storm. Their integrated business models, strong balance sheets, and commitment to dividend payments make them attractive options for investors seeking passive income from energy stocks. While oil prices may continue to fall, these two oil majors are built to handle the volatility and could prove to be savvy investments for those looking to generate steady returns.
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