<p>Shares in Exxon Mobil (NYSE: XOM) have been beaten, beaten and injured. I do not think much lighting is needed to describe how painful it has been, with the Exxon Mobil stock still down over 42% from its peaks from 2020 to 3 January.
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Obviously, the decline in oil has been an important catalyst for the decline in Exxon Mobil. This applies to the case in energy storage across the board. From top to bottom, the raw material has lost more than half of its value, while the energy sector has so far been the worst performing group in the S&P 500.
Not to get too deep into the details, but at its low point, the XOM stock was down more than 57% from its peaks for 2020 and down 63% from its five-year high.
We have a unique situation that operates energy storage right now. As tensions grew between some of the world’s largest oil producers, crude oil was already under pressure. But red flags rose as the coronavirus began to spread rapidly throughout China. With many regions and cities being shut down, demand from China declined.
Remember that oil is demand-driven. This means that prices will be lower when supply is higher. When demand is higher, prices go higher. The opposite forms are also true, and the market is doing its best to balance the demand for dynamics.
With demand around the world declining due to COVID-19, it has been a major negative for crude oil prices. In addition to the painful development, however, came an even worse development: a price war.
Tensions between Saudi Arabia and Russia boiled over as producers began to flood the market with supply. Their goal was to break the backs of weaker and high-cost producers and regain control of the oil market.
Crude oil started the year north at $ 60 a barrel and recently dropped to $ 20. Reports are now out – mainly due to comments from President Trump – that OPEC may return to the table to agree on a reduction in production, which will help smooth out the dynamics of demand. It gave a huge bump to raw prices on Thursday, April 2, which climbed more than 24% during a record-breaking session.
However, a failed agreement may well send oil prices back at $ 20.
Fossil fuel does not leave
Despite all the lumps in the sector, investors should realize that fossil fuels are not going anywhere. While electric vehicles, solar energy and other alternative sources will continue to grow, fossil fuels still have decades of use left in the tank, especially at these prices.
For buyers, they want to avoid low-quality energy companies. For many, it means sticking to some of the largest in the group, such as Exxon Mobil shares, Chevron (NYSE: CVX), BP plc (NYSE: BP) and a few others.
Although stock prices are falling enormously, many of these names are still a possibility, provided an investment horizon is long enough.
A closer look at Exxon Mobile Stock
Below is a 15-year monthly chart. There are no moving averages and the chart is adjusted for dividends.
We are seeing a solid recovery in the Exxon Mobil stock now but must see it clear this $ 41 to $ 42 range. Above puts $ 50 plus on the table. If it cannot recover the $ 41 to $ 42 range, or if it does not, but does not support it, Exxon Mobil can test its low levels close to $ 30.
If so, see that the stock holds $ 26.50 should they fall that far. I know that many basic investors do not like technology, but mixing the two could have prevented some big losses. Looking back is 20/20, but when the $ 60 to $ 62 range gave way, tech investors knew that more downside was in store (though probably not that much downside).
From here, however, you must remember that exxon Mobil bearings cost as much as oil.
At the time of the most recent bill, Exxon had over $ 24 billion in long-term debt. However, total assets of $ 362.6 billion easily topped their total liabilities of $ 170.9 billion. It’s an overly simplistic way of looking at it. But investors who want to choose energy stocks want to go with those that will still exist and avoid going up in the stomach.
Investors who want to avoid occasional stock risks and are looking for a more diversified game may consider the Energy Select Sector SPDR ETF (NYSEARCA: XLE). The XOM share is the best holding in the exchange-traded fund and weighs 21.8%. Chevron is the second largest, 20.8%, as the two companies make up more than 42% of the ETF.
Kinder Morgan (NYSE: BMI), EOG Resources (NYSE: EOG) and ConocoPhillips (NYSE: COP) round out the top five holdings in XLE. Finally, the ETF’s 10 best holdings account for 75% of its weighting.
Bret Kenwell is the director and author of Future Blue Chips and can be found on Twitter @BretKenwell. At the time of writing, Bret Kenwell had no position in any of the above securities.