Intel, Nvidia and many other big tech stocks giants didn’t have a desirable start this New Year. That definitely gave Dow Jones and the U.S. market overall some dreadful lows. But fortunately, there was one industry that did remarkably well. That industry rather was the reason behind sustaining Dow Jones and the U.S. market. You might have guessed about this industry, and you are right if you guessed for ‘oil industry.’
In the last three months of last year, the oil industry saw its all-time high. In the second half of 2018, strong earnings were recorded by ‘Exxon Mobil Corp’ and ‘Chevron Corp’. Good profits were recorded despite the hopes- drowning 38 percent dip in the oil prices that happened around the end of last year. The oil industry showed strong immunity and determination against the number of risks involved around geographical perils; which in turn has a strong effect on the areas that relate to technology and electronics.
Extending the profit graph from the giants like Exxon and Chevron, other oil big shots such as BP, Total and similarly, so on, are all geared up to introduce us to their earnings very soon. If we follow the reports from The Wall Street Journal, early estimates give us a rough estimation of the gains of these two oil companies. The estimated profits are 84 Billion Dollars. These profits are 10 billion dollars more than the past four years. Last year, in the last four months, these two oil companies achieved a profit bracket of 3 to 6 Billion Dollars. This achievement gave them a 10 to 19 percent boost in their profit targets in comparison to the year 2017.
Exxon and Chevron’s performance was analyzed by Edward Jones (an analyst at Brian Youngberg) when he said-
“These companies have figured out how to operate in this new environment, and they have adjusted well. The key going forward will be maintaining discipline. This is now a low growth industry, so you have got to invest well.”
Since, October last year, the oil industry was witnessing a quite a sharp fall in its prices by 24.27 percent in comparison to its annual peak. Therefore, it was a matter of healing when Exxon showed solid growth in the last quarter of 2018. Looking at the records, from December last year to date, Exxon has shown an impressive growth of 15 percent increase in its valuation, projecting a positive effect on the entire oil industry.
One can say there has been a ripple effect of Exxon’s good performance. How? Well, with oil industry gaining strength there has been a positive effect on the U.S. economy. In return, the Federal Reserve is maintaining patience around two aspects- one around the increasing its rates, and secondly around the U.S. job sector which is showing steady growth. All this is slowly yet surely taking off the pressure off from Dow Jones and the U.S. stock market.
With respect to the growing U.S. job sector, The White house tweeted-
"We added 304,000 jobs, which was a shocker to a lot of people. It wasn't a shocker to me." pic.twitter.com/hHzogMtXG5
— The White House (@WhiteHouse) February 1, 2019
On the other hand, the trade talks between China and the U.S are also looking promising. Of course, these talks concern all the major sectors, but as per the reports obtained from CCN, China ‘remains as an interest for the oils companies.’
In a scenario where the trade deal doesn’t go through between the two countries till the 1st of March, then there can be some adverse effects on the oil industry. It may lead to a downturn for the crude oil rates. According to Dr. Philip K. Verleger, Jr.-
“Those in the oil market also worry about China. The country’s economic growth has been a key driver of global crude oil consumption,” Verleger, Jr. wrote, adding that there exists a possibility it may negatively affect the growth of international markets.
“The danger occurs because lower oil demand growth in China comes just when independent refining capacity there is rising. The capacity growth has been financed primarily by debt, most likely supplied by China’s alternative lenders. As demand slows, these refiners will turn to international markets, dumping products in Singapore, the Americas, or Europe to earn hard cash.”
Although the hopes around the trade deal between the two countries are quite high. The president of U.S. Donald Trump has assured that the trade deals with China are promising and neither of the two countries wants to up the tariffs from what they are currently. On this, the president of U.S tweeted-
China’s top trade negotiators are in the U.S. meeting with our representatives. Meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal. They are correct. I will be……
— Donald J. Trump (@realDonaldTrump) January 31, 2019
All these factors are at least the near future of the U.S. stock market looks optimistic. It is a combined effect from major industries of the country performing really well against all the ill predictions and anxiousness. As the hope is already high, if the future holds a successful dealing with China in the coming weeks, one will be able to see some solid growth and momentum in the oil industry, the technology sector, and the car manufacturing industry.