(Oil Price) – Exxon Mobil Corp. (NYSE:XOM) was up slightly in Thursday’s trading session after analysts at BNP Paribas Exane downgraded its shares to Underperform from Neutral with a $105 price target, good for 14% downside from the current price.
The downgrade marks the first Sell equivalent rating XOM has received in more than a year, with analysts predicting a further decline in crude oil prices. Previously, XOM stock posted gains for seven straight sessions.
“Substantial excess OPEC+ capacity is hanging over the sector like the Sword of Damocles,” analysts including Lucas Herrmann wrote in a note to clients. Oil prices “will have to move to levels that may not only stimulate a demand improvement but also drive short-cycle US supply curtailment,” they said.
The bearish take on Exxon and oil markets has come at a time when the big oil price rally that kicked off last week started unwinding. Brent crude futures for December delivery were trading at $76.63/barrel at 11.40 am ET on Thursday while WTI crude was changing hands at $73.24/barrel. That marks a sharp fall from their Monday 2-month high of $81.12 for Brent and $77.91 for WTI crude.
Oil prices were moving lower on Thursday after the U.S. Energy Information Administration reported that crude inventories increased by 5.8 million barrels for the week to October 4. The EIA reported a build of 3.9 million barrels for the previous week. On Tuesday, the American Petroleum Institute reported a sizable 10.9 million barrels increase in crude inventories while gasoline stocks fell by 6.3 million barrels in the period, with production averaging 10.2 million barrels per day.
Last week’s oil price rally was triggered by Washington’s indication that Israel could strike Iran’s oil facilities. Clearview Energy Partners has predicted that oil prices could gain as much as $28/bbl if flows are blocked in the Strait of Hormuz; $13/bbl if Israel strikes Iranian energy infrastructure and $7/bbl if the U.S. and its allies placed economic sanctions on Iran.
By Alex Kimani for Oilprice.com
