Oil Industry: Adapting to Change and Growing Against the Odds
Most of the major tech stocks like Nvidia and Intel had a rough start this year. Luckily, the Dow Jones’ momentum is properly sustained by one exceptionally performing industry. Yes, the oil industry is starting the year off with a bang.
Q4 of 2018 was by rough estimates, one of the best years for the industry to date. Exxon Mobile Corp and Chevron Corp managed to generate insane profits in the latter half of the year.
Near the end of 2018 however, the oil prices declined by 38%. This development only seemed to motivate the industry as it demonstrated harsh resilience towards geopolitical factors which heavily impacted the technology, electronics and even crypto sectors.
Following the profit reports from Exxon and Chevron, other large oil conglomerates like BP and Total will release their earning in the next few days. By rough estimates, the companies have a yearly profit of nearly $84 billion. Exxon and Chevron managed to generate a profit of up to $6 billion in the last quarter of 2018 alone.
The oil industry has gone through many changes. Many companies are still struggling to come to terms with the fact that they are now operating in a low-growth industry. Those who have adapted to this new environment are progressing because they are maintaining discipline.
The oil industry has had its fair share of price volatility
Exxon alone has managed to record a 15% increase in valuation since the oil sector’s recovery. There is no doubt that the Federal Reserve realizes how important the oil sector is to the US economy. If the government statistics about job growth are true, then the Federal Reserve is doing well not to increase its rates. This has resulted in the pressure on the Dow and the US stock market to start dropping gradually.
Oil companies are also very invested into the United States’ ongoing trade discussions with China. China’s economic growth has been a key factor in the increase of global crude oil consumption. If a trade deal is not achieved, there will be many negative effects on the growth of international markets.
Short-term outlook on the US stock market so far remains positive. The trade talks over the next month will strongly affect the oil, technology and car manufacturing industries.
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