ExxonMobil's Secret Strategy Behind Its Oil Price Surge

ExxonMobil's (XOM) stock has returned 59.2% over the past year, significantly outperforming the S&P 500 at 20.2%. The company attributes this success to a Middle East supply shock that it claims did not anticipate. However, an analysis of ExxonMobil's own financial reports reveals otherwise.

According to Trefis, weeks before the oil price surge, ExxonMobil had already made strategic decisions that would pay off in the long run. The company was upgrading its Singapore Resid Upgrade project, which converts the bottom of the barrel into lubricant base stocks. Management reported that the new base stock was sold out, with an additional 20,000 barrels per day essentially sold out as well.

The Fawley Hydrofiner in the UK was also a key player in ExxonMobil's strategy. This facility converts exported high sulfur gas oil into domestic ultra-low sulfur diesel. Both projects were bets that diesel and base stocks would out-earn residue, and they have done just that.