Why Frontline Stock Popped, but Exxon and ConocoPhillips Dropped

Rich Smith, The Motley Fool

Mon, May 5, 2025, 10:04 AM 5 min read

• Last month, OPEC announced it will increase oil production in May.

• Now it's May, and OPEC is announcing plans to increase oil production again in June.

• Cheap oil is bad for oil producer profits, but great news if you're in the business of shipping oil.

Uh-oh. OPEC is up to something, and it's probably not good for oil stocks -- or more precisely, not good for all oil stocks.

Over the weekend, the OPEC+ group of oil producing nations, plus a few that aren't officially a part of the cartel, such as Russia, announced plans to "surge" production of oil in June, as CNBC reports.

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Stocks of oil-producing companies including ExxonMobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) are reacting poorly to the news, down 2.5% and 3.6%, respectively, as of 10:20 a.m. ET. In contrast, Frontline (NYSE: FRO) stock, which operates tankers that carry oil products from place to place, is doing very well indeed this morning -- up 3.9%.

So what's up with that?

When you think about it, the price moves of these three stocks are actually entirely logical. Over the past year, international benchmark Brent crude prices are down a staggering 28%, as are the prices of WTI crude (the U.S. benchmark).

Worries over President Donald Trump's tariff policy, and its effect on global trade and global economic growth, are certainly contributing to the problem; there has been a notable drop-off in oil prices since Inauguration Day back in January, and especially since early April, when the president began announcing his "reciprocal tariffs" initiative. And now, despite oil prices weakening already, OPEC+ is planning to increase production? For the second time in two months? (OPEC already boosted production in May, by the same 441,000 barrels-per-day amount it just announced for June.)

Any first-year economics student can tell you what happens next: When you increase supply (twice!), and demand holds constant, prices fall. What's more, when you increase supply, and demand falls (because, for example, someone's slowing down the global economy by raising tariff barriers to trade), prices fall even more.

That's almost certainly what's going to happen here, and if prices fall, and costs don't fall along with them, this means profits will decline at both ExxonMobil and ConocoPhillips.

Conversely, this bad news for Exxon and Conoco is actually good news for Frontline. And why? Because, as that same economics student can tell you, when prices of a good or service fall, the demand for that good or service tends to increase. Basically, oil is going on sale right now, and so the likely result is that people will buy more of it.