Buy Ratings Issued for Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX)
Stock Traders Daily has reiterated buy recommendations on Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX). We initially did this in September 2015, our price targets were hit in November of 2015, but the stocks have fallen back again and we have reiterated our buy recommendations on both of these oil related plays.
Also, it is our opinion that the commodity is finding a bottom and oil itself looks attractive.
In fact, evidence suggests that if oil can hold these levels it will be double in price 9 to 12 months from now, which supports our buy recommendations above and our opinion about the commodity's price going forward. That evidence includes capex spending reductions in the industry, potential bankruptcies from higher cost producers, and the probability for an eventual agreement between Russia and OPEC to support oil prices by reducing production in a joint effort.
That last one is the big one, and until recently there was not much interest in joining forces, but information received over the weekend suggest that there is.
Initially, it was considered that Venezuela's attempt to bring people to the table had failed, but one thing was clear and that is that Russia is interested in supporting prices. A week or so ago Opec said that they needed non Opec producers to come to the table as well, so essentially Venezuela's effort made it clear that Russia was willing to participate. No formal meeting was set, and that was a disappointment to some, but it certainly seems as if the players are ready to participate.
Global economic concerns and oil:
Supply isn't the only problem, global economic growth concerns exist as well, and oil prices are declining because of both of these influences, and although we expect prices to be higher if production cuts are made jointly, we do not think that the global growth issues will go away. In fact, global growth concerns are likely to increase if oil prices increase.
Specifically, consumers have been a direct beneficiary because gasoline prices have declined substantially, but if oil prices increase like they seem capable of doing those same consumers will feel a pinch that could keep them from spending like they otherwise would. This would hit GDP Square in the face and could cause economic recession.
Wall Street seems to want higher oil prices today, but that's not really what they want. What they really want is to see improvements in the global economic growth data, and although that variable also impacts oil prices, it is clear that oil prices could increase and further impair global economic growth rates which would not make Wall Street happy at all. That would further support our opinion that a market crash is possible as 2016 comes to an end.
Our outlook is for oil prices to increase measurably from here and we prefer Exxon Mobil and Chevron in addition to direct commodity plays.