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Exxon Leads Oil Stocks Higher as Crude Jumps, Shell Boosts Investor Returns

Higher oil prices and increased production forecasts is allowing Shell to boost shareholder returns, a move that has U.S. oil stocks higher in early Wednesday trading.

Exxon Mobil  (XOM) - Get Exxon Mobil Corporation Report lead U.S. oil stocks higher Wednesday as crude resumed its march to the highest levels in seven years and European rival Royal Dutch Shell  (RDS.A)  unveiled plans to boost dividends and share buybacks.

Shell told investors Wednesday in London that it will increase shareholder returns to between 20% and 30% of free cash flow, starting with a payout from second quarter earnings, while holding its capital spending plans in place at $22 billion. The Anglo-Dutch oil major also boosted its forecasts for production, sales volumes and natural gas output. 

"In conjunction with the increased distributions, Shell will retire its net debt milestone of $65 billion and will continue to target further strengthening of its balance sheet and AA credit metrics," Shell said.  

Exxon shares were marked 0.4% higher in pre-market trading to indicate an opening bell price of $61.61 each, a move that would nudge the stock's year-to-date gain to around 49.5%. Chevron  (CVX) - Get Chevron Corporation Report shares, meanwhile, bumped 0.13% higher to $104.12 each while ConocoPhillips  (COP) - Get ConocoPhillips Report was marked 1.2% higher at $61.00 each.

Shell's U.S.-listed shares, which trade on the New York Stock Exchange, jumped 1.1% to $41.20 each and are up 17.25% since the start of the year.

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The moves follow a sustained rally in global crude prices, which are testing the highest levels in three years, amid a notable rebound in post-pandemic energy demand and ongoing supply restrictions from OPEC.

Cartel leaders failed to reach an agreement earlier this week that would have eased output curbs, which are currently taking 5.8 million barrels from the market each day, between now and the end of the year.

WTI crude futures for August delivery, the U.S. benchmark, jumped $1.22 per barrel in overnight trading to $74.59 each, just shy of the seven year high reached earlier this week, while Brent crude was marked $1.21 higher at $75.74 each.

U.S. crude stockpiles are declining at a record pace, with Energy Department data showing the Strategic Petroleum Reserve's total falling by 1.15 million barrels per day over the past month. 

Overall crude supplies fell by 6.72 million barrels last week, the Energy Department said, taking stocks to the lowest levels since March of last year.

Meanwhile, industrial demand is surging: European factory activity rebounded to its strongest pace on record last month and similar all-time highs noted in surveys from the U.S. and Asia.