Global Trader: The World’s Oil Comes To Wall Street

If not for the rise of Silicon Valley, Big Oil would still run the world. Even today, ExxonMobil (XOM) is one of the biggest “traditional” companies on Wall Street.

Only its fellow old-school giants compare: Warren Buffett’s Berkshire Hathaway (BRK), Visa (V), Walmart (WMG), Procter & Gamble (PG), Johnson & Johnson (JNJ), UnitedHealth (UNH).

But oil is cyclical business. In 2013, XOM led the pack with $400 billion in market capitalization. Its footprint was cut in half in the pandemic before rebounding to close to its peak in the last few months.

I think XOM has a long way left to rise in an era where Russian resources remain cut out of the global market. Management learned a lot from the pandemic and is extremely reluctant to go toe to toe with OPEC another time.

Growth here will be steady and less erratic. Shareholders will get a smoother ride.

And where XOM goes, global oil companies follow. Many of the majors are traded on Wall Street. Some even approach the giant for sheer size.

Shell (SHEL) is the biggest, formally headquartered in the Netherlands as befits its origins as Royal “Dutch” Shell. It’s only a $200 billion company now, barely competing with names like Oracle (ORCL), Cisco (CSCO) and Nike (NKE).

The rest of Europe’s majors look like U.S. wildcats. Total (TTE) in France. Equinor (EQNR), which I love, in Norway.

BP (BP), of course. But BP had a lot riding on its partnerships with Russia and has to scramble to get back on track now. Eni (E) in Italy rounds  out the group.

At this point you’re down in the $50 billion bracket. Each of these companies is a huge deal in its domestic economy. They literally keep the lights on and the wheels turning.

But they got a little too reliant on Russia in the past decade. Time they came into their own . . . if they can.

Meanwhile, they’re getting overshadowed by China, where PetroChina (PTR) and SNP (SNP) rule the roost but barely weigh in together at half of XOM’s commanding market capitalization.

But China is dubious territory these days. I’d much rather buy Petrobras (PBR) from Brazil. And barring massive management reforms, PBR is not exactly high on my want list right now.

Stay close to home. North American producers will take the risks and do the heavy lifting to get crude flowing . . . and then sell it to the Europeans.

When one of them does especially well, XOM will buy it and add the reserves to its own. That’s how the food chain works.