Oil's 4-month low hands Exxon, Chevron a fresh problem
The Iran war handed Exxon Mobil (XOM) and Chevron (CVX) their sharpest stock surge in years. Then the peace dividend arrived, and it had the opposite effect. West Texas Intermediate prices fell to about $69 a barrel on June 28, its lowest since late February. This happened as tanker traffic ...
Overview
The Iran war handed Exxon Mobil (XOM) and Chevron (CVX) their sharpest stock surge in years.
Then the peace dividend arrived, and it had the opposite effect.
West Texas Intermediate prices fell to about $69 a barrel on June 28, its lowest since late February.
This happened as tanker traffic through the Strait of Hormuz increased and Saudi Arabia began loading vessels at its Ras Tanura terminal.
It is an event that indicates major Gulf producers are ramping up their output.
Major Gulf producers ramping up output also sent Brent petroleum down by more than 10%, marking its steepest weekly decline in months.
Both companies now face second-quarter earnings that look nothing like the ones Wall Street priced in two months ago.
How quickly the trade reversed for Exxon and Chevron
Exxon Mobil is trading at $136.12, down approximately 23% from its 52-week high of $176.41.
Chevron sits at $169.13, which is down about 21% from its $214.71 peak.
Both stocks have declined in five of the past five sessions.
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On June 22, the U.S. Treasury's Office of Foreign Assets Control published General License X.
General License X is a sweeping 60-day authorization that allows buyers worldwide to purchase Iranian crude with no volume cap.
Brent fell more than 3.3% that day, CNBC reported.
According to Bloomberg, Persian Gulf oil exports are back to 75% of pre-war levels.
This supply is growing further as Saudi Arabia has restarted oil shipments from its Ras Tanura port.
As a result, the war situation that drove both Exxon Mobil and Chevron stocks to their 2026 highs is fading faster than analysts expected.
What Exxon and Chevron's first-quarter results say about Q2
Exxon Mobil reported $85.14 billion in Q1 2026 revenue, Yahoo Finance confirmed, marking a 2.4% increase from the same period last year.
Yahoo Finance also reported that Chevron's revenue remained flat at $47.56 billion compared to the same period.
However, despite stable revenue, Exxon's net income fell 45% from the same quarter last year, while Chevron's dropped 36%, according to CNBC. This decline is a result of previous financial hedging.
Details
Both companies missed out on maximum profits because they fixed their oil prices before the market jumped above $100.
Now that oil is retreating toward $69, those price locks are no longer in play.
Exxon Mobil and Chevron's upcoming second-quarter profits will depend on current market prices.
Earlier in May, CEO Darren Woods said that "the market hasn't seen the full impact" of the war's disruption, Barron's noted.
Today, that protective market cushion is gone.
Oil supply is rising faster than the market expected
The Hormuz reopening is only part of what is dampening oil prices.
Iraq is threatening to consider all options, including exiting OPEC, if its production quota is not significantly raised, according to FXStreet.
The United Arab Emirates has already left the organization, and Middle Eastern producers are racing to ramp up output after months of forced cutbacks.
Related: Chevron surprises investors with eye-catching disclosure
As a result, major banks are changing their targets.
Morgan Stanley changed its Brent forecast to $90 a barrelfor the third quarter of 2026 and $80 for the fourth quarter, while maintaining overweight ratings on both XOM and CVX.
Goldman Sachs also moved its fourth-quarter 2026 Brent estimate to$80 and its 2027 average to $75, according to Investing.com.
What the dividend floor means for Exxon and Chevron investors
During a market drop, energy investors are heavily drawn to the dividend floor, which is a company's financial commitment to maintain steady payouts even when oil prices fall.
ExxonMobil and Chevron are currently leveraging this dividend floor to keep shareholders invested.
ExxonMobil pays investors $1.03 per share every three months, the company confirmed. Exxon Mobil also revealed that it is buying back $20 billion of its own shares to boost stockholder value, assuming reasonable market conditions.
Meanwhile, Chevron's quarterly payout is $1.78, a company press release indicated, and it's targeting $3 to $4 billion in structural cost reductions by the end of 2026, the firm's newsroom reported.
These moves come as the broader oil market faces significant headwinds.
The EIA’s Short-Term Energy Outlook projects global oil demand will fall by 1.1 million barrels per day in 2026.
This contrasts sharply with earlier growth forecasts for the year.
Until supply and demand stabilize, these dividend floors will soften the blow of market volatility, even if they cannot remove it entirely.
What Exxon and Chevron investors should monitor
- Q2 2026 earnings: Without hedge buffers, upcoming Q2 earnings will rely entirely on lower $69 to $72 oil prices. Analysts expect filings to be in by late July and early August.
- U.S.-Iran Doha talks: U.S. and Iranian officials are scheduled to meet in Doha to discuss the Strait of Hormuz, Axios reports. A breakdown in the talks could send oil prices up sharply and quickly reverse losses for XOM and CVX.
- OPEC+ cohesion: Iraq's production quota demands and any further departures from the alliance could accelerate the supply excess and push prices lower into the second half.
- EIA demand revisions: Any further decline in global oil demand would put additional pressure on Exxon and Chevron's second-half profits.
Related: Exxon, Chevron investors cautious after oil news
Source
Originally published at www.thestreet.com.
