I’ve never led off with an anecdotal tale for Exxon Mobil (NYSE:XOM) or any publicly traded company for that matter. But since this is the new normal, let’s try something new. When I checked my credit card statement, I realized that the last time I bought gasoline was during the Fourth of July weekend. At time of writing, it’s August 8, which is not a favorable dynamic for Exxon Mobil stock.
No, I do not believe that a big oil firm cares about whether I buy gasoline or not. So please, stop typing that angry email to my editor. Rather, I’m 100% confident that to at least a significant degree, most Americans share a commute-less lifestyle similar to mine right now.
For those that are fortunate enough to work from home, the morning commute has suddenly been eliminated. Of course, that puts tremendous pressure on Exxon Mobil stock, which finds itself struggling for a catalyst. Even if you’re working, I’m certain that the reduced traffic has at least made your commute quicker and more efficient.
Again, that heaps pressure on XOM at a time when the underlying company needs it the least.
Contrary to popular opinion, not all gig workers operate exclusively from home. Business owners and independent contractors have an added responsibility to put meat on the table – an employer is obviously not going to perform that function. So, part of the grind in the gig economy involves driving.
But from my vantage point and others’, opportunities to do so are limited and to be frank, discouraged. Therefore, it’s hard to put a glowing recommendation for Exxon Mobil stock. I’m all the more cautious because the industry is possibly at an inflection point.
Exxon Mobil Stock Lies at a Crossroads
Obviously, every tradable asset needs a justification to rise in value. But for Exxon Mobil stock, this search for a catalyst has reached almost desperation levels. Because with my experience multiplied millions of times over, the case for XOM becomes exponentially less credible.
Interestingly, one automotive-related habit for me that hasn’t changed in the new normal is checking the traffic. But rather than looking for congestion zones, I’m looking for protests. Some of the more aggressive calls for social equity and justice have led to freeways being shut down for hours.
Take it from me – if you’re caught in one of those, it’s not fun!
However, I can’t help but notice swathes of green covering my local roadways, no matter what time it is. As I alluded to earlier, rush hour traffic has simply vanished. But at some point, this congestion has to get back to old normal levels for Exxon Mobil stock to swing higher.
Let’s face facts – XOM isn’t a sexy biotechnology firm like Inovio Pharmaceuticals (NASDAQ:INO) or my old stomping grounds Sorrento Therapeutics (NASDAQ:SRNE). Thus, XOM will need real fundamentals to rise, not social media commandos exciting themselves into a frenzy.
So, what about them fundamentals? Well, I can tell you that the correlation coefficient between oil prices (West Texas Intermediate) and the rate of automotive congestion compared to last year in car-crazy Los Angeles is a robust 76.7%. In other words, more cars on America’s roadways likely results in oil prices (demand) moving higher.
Unfortunately, traffic in LA has flatlined to 63% below its year-ago volume. Not surprisingly, oil prices have lost their momentum following a dramatic reversal from April’s lows. Thus, we need a credible, longer-term catalyst to change this narrative.
Economic Concerns a Drag on XOM
Recently, weekly jobless claims dropped to just under 1.2 million. This is an encouraging sign considering that Wall Street estimated another 1.4 million would file for unemployment benefits. At the same time, we have incurred 20 straight weeks of claims above one million.
Unfortunately, I’m writing this without the benefit of knowing what the July jobs report entails. Specifically, I’d like to know where we are with permanent job losses, along with a sector-by-sector breakdown.
Still, I’m not entirely sure if one report will make a difference for Exxon Mobil stock. Again, we need a substantive catalyst to get the ball rolling. Probably, this means a concerted Congressional effort to support the economy while many states are in soft quarantine mode, as well as a safe, effective strategy to reopen.
Until we receive these credible signals, you may want to pass on XOM for now.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.