Oil producer stocks and U.S. crude oil futures surged on Tuesday after President Joe Biden on Monday called on oil companies to pay higher taxes to reduce fuel costs for consumers. Exxon Mobil (XOM) shares and Chevron (CVX) shares advanced in trading on Tuesday.
Biden has repeatedly targeted big oil companies in recent months, accusing them of making record profits by limiting production, keeping oil supplies tight and prices high. In an attempt to combat rising prices as the midterm elections loom, the president released oil from the United States Petroleum Strategic Reserve.
Meanwhile, U.S. crude prices rose 2% on Tuesday to $88.37 a barrel – still well below an early October high above $93. Oil futures traded down 0.2% early Wednesday, holding above $88.
Prices rose nearly 9% in October, the first monthly advance since May. On Tuesday, a weaker dollar overcame concerns over possible new Covid-19 restrictions in China, pushing oil higher. Entering November, the 2 million barrels per day production cut by the Organization of the Petroleum Exporting Countries and its major allies including Russia, known as OPEC+, is officially in effect.
European Union sanctions against Russia are also expected to tighten in December, imposing new bans on Russian oil.
Against that backdrop, Biden on Monday called on Congress to levy a tax on energy companies if they don’t use booming profits to lower energy costs for consumers. The Wall Street Journal reported Monday that Biden had been considering approving a tax on oil companies for months.
“Their profits are a war bonanza,” Biden said during his White House speech. “In wartime, any company that receives windfall profits like this has a responsibility to act beyond the narrow self-interest of its executives and shareholders.”
Oil Producer Stocks: Taxing Soaring Profits
Biden’s comments come after shares of oil producers Exxon Mobil and Chevron reported combined third-quarter net profit of more than $30 billion. Irving, Texas-based Exxon Mobil posted the highest quarterly profit in its 152-year history. This is Chevron’s second best financial result, just after its performance in the second quarter.
“There have been discussions in the United States about our industry returning some of our profits directly to the American people,” Exxon CEO Darren Woods said last week in prepared remarks ahead of the meeting. call for results.
“That’s exactly what we’re doing in the form of our quarterly dividend,” Woods said.
Chevron CEO Mike Wirth also signaled last week that if energy companies were taxed, they could produce less oil.
“Usually if you want less of something, you tax it,” Wirth told Bloomberg TV last week. “If you want more of something, you tend not to tax it.”
Exxon Mobil stock climbed 1% to 111.91 on Tuesday during market trading. Chevron shares rose 0.7%. Since hitting a recent low of 140.46 on September 27, Chevron stock is up 30%. Chevron is in a buy zone above a 182.50 entry in a 20 week consolidation. Exxon extended after October breakout.
Supported by Warren Buffett western oil (OXY) added 1.7%. Occidental is in a buy range after breaking a buy point at 72.14.
Oil Producer Stocks Shell (SHEL), based in the Netherlands, rose 0.4% while the London-based company PB (BP) was up 0.4% before closing down 0.2%. On Monday, BP reported its second highest quarterly profit. Profits were boosted by $3 billion made in gas trading throughout the quarter. BP also announced an additional $2.5 billion in share buybacks.
On Tuesday, Saudi Aramco, Saudi Arabia’s national oil company, reported a 39% jump in quarterly profits.
OPEC raises oil demand forecast
On Monday, OPEC raised its forecast for global oil demand. The oil cartel’s World Oil Outlook 2022 report indicates that demand will continue to grow in the medium to long term, increasing by 23% by 2045.
OPEC projects that globally there should be an average annual increase of 2.7 million barrels of oil equivalent per day until 2045. Total investment in the oil sector is 12, $1 trillion through 2045, according to the report.
“The chronic underinvestment in the global oil industry in recent years, due to industry downturns, the COVID-19 pandemic, as well as policies focused on ending funding for fossil fuel projects, is a major cause for concern,” the report said.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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