Oil shares, such as Exxon Mobil (XOM) - Get Report and Chevron (CVX) - Get Report, rose on Tuesday as oil prices hit a 2 1/2-year high, with investors expecting demand to outstrip supply during the global economic recovery.
In addition, Credit Suisse analyst Manav Gupta raised his price target for Exxon Mobil shares to $72 from $69, affirming his rating at neutral.
The stock recently traded at $63.61, up 2.5%.
Free cash flow is headed higher for the Irving, Texas, company, as demand for refined products starts to hit prepandemic levels, he said, according to Bloomberg.
While Exxon Mobil's competitors have been unloading refining assets at discount prices, the company has been investing in refining assets, Gupta said.
Chevron shares recently traded at $109.36, up 1.3%.
U.S. crude oil stood at $71.78, up 1.27%, after reaching $72.03 earlier. That was the highest price level since October 2018.
“Everybody’s continuing to do the math on rising demand and hesitancy among producers to dive back in and put more oil in the market,” John Kilduff, a partner at Again Capital, told Bloomberg.
“So there’s a developing structural supply-demand deficit.”
OPEC and its oil-producing allies, known as OPEC+, agreed on June 1 to continue to gradually ease production cuts.
The original plan, agreed on in April, was to return 2.1 million barrels a day to the market between May and July 2021. The group will meet again on July 1 to devise a plan for future production policy.
In May, TheStreet.com Founder Jim Cramer discussed the path to “investability” for Exxon Mobil and the other big oil producers.