Oil stocks gain after OPEC production plans signal bullish outlook for global demand

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  • Shares of companies tied to the oil sector rose after OPEC + agreed to gradually ease production cuts, signaling a bullish outlook for global demand.
  • The energy sector fund XLE rose 3%, while some oil exploration & production companies rose as much as 12%.
  • Oil prices also neared two-year highs on Tuesday.
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Shares of companies tied to the oil industry rose on Tuesday after OPEC+ agreed to gradually ease production cuts and Saudia Arabia’s energy minister signaled a bullish tone about the global recovery.

At a meeting on Tuesday, the group confirmed its plan to continue to raise production only gradually over the coming two months, implying no change in their current policy.

“The demand picture has shown clear signs of improvement,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the meeting, according to Bloomberg News.

The news that supply will only rise slowly pushed the Energy Select Sector SPDR Fund (XLE) over 3% Tuesday. Exxon Mobil rose as much as 3.9%. Exploration and production companies climbed, with Marathon Oil Corporation and Devon Energy Corporation both climbing over 12%. Pioneer Natural Resources gained 5%.

The energy sector has outperformed the S&P 500 and is the best performing sector in the last month and in all of 2021. XLE is up about 42.4% year-to-date, compared to the S&P 500’s gain of nearly 12%.

Bullish news from OPEC+ also lifted oil prices near two-year highs on Tuesday. Brent crude was trading around $70.17 per barrel at 12:51 p.m. E.T. Tuesday was the first time prices have risen above the $70 mark since March.

OPEC and its non-OPEC partners agreed to stick to the plan first made in April, where 2.1 million barrels per day of supply will be brought back to the market by July, Bloomberg said.

Fundstrat’s Tom Lee said the energy sector is his top sector pick, and one that is a “contrarian” group given widespread skepticism from Wall Street.

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An activist investor with a 0.02% stake in Exxon ousted 2 of the oil giant’s board members in a historic win

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  • Activist investor Engine No. 1 was victorious in winning at least two board seats on Exxon Mobil’s board of directors.
  • The win was historic given that the first time activist investor built a tiny 0.02% stake in the company.
  • The proxy fight between the activist investor and Exxon Mobil signals the increased investor attention towards green energy initiatives.
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Activist investor Engine No. 1 scored a historic win on Wednesday after it won two board seats on Exxon Mobil’s board of directors.

A bitter proxy fight between the major oil company and the small activist investor circled around green energy initiatives, executive pay, and the diversification of Exxon’s fossil fuel business.

The win took many by surprise given that Engine No. 1 is a first time activist investor with just a 0.02% stake in Exxon. Typical activist investor campaigns have been led by well-known Wall Street figures who buy a position upwards 10% in the targeted company.

The win by Engine No. 1 highlighted the growing appetite among investors for corporations to tackle climate change and green energy initiatives head-on. Many top institutional investors view addressing the climate as essential for a successful long-term business, including BlackRock founder and CEO Larry Fink.

Exxon was staunchly against Engine No. 1’s two board nominees, Gregory Goff and Kaisa Hietala. Exxon CEO Darren Woods refused to meet with the nominees and told shareholders that voting for them would “derail our progress and jeopardize your dividend,” according to Bloomberg.

Just two-days before today’s annual shareholder meeting, the company pledged that it would add two new directors to its board to counter-balance the potential addition of Goff and Hietala.

Other fossil-fuel companies have seen a revolt among shareholders in vote proposals. Chevron, DuPont de Nemours, and ConocoPhillips have all seen their shareholders issue rebukes to management by voting in favor of various proposals centered on climate change, Bloomberg highlighted.

Two board seats on Exxon remain undecided, and one or both of them could still potentially be awarded to Engine No. 1. Whether Woods will take the advice of the new board members and pivot towards a greener future remains to be seen.

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