Exxon Mobil (XOM) is considered by many to be the strongest stock in the energy sector. However, the strongest stock in the energy sector isn’t immune to falling oil prices. Unfortunately, as with any other energy stock, Exxon Mobil has been following a strong downtrend for more than 3 months at this point. How long is the downtrend likely to last? More importantly, how can binary options traders take advantage of the trends? Today, I’ll do my best to give you the answer to both of these questions.
How Long Is Exxon Mobil Likely To Continue Falling?
Unfortunately, it’s my opinion that the stock is likely to continue falling or trade flat for quite some time. The reality is that while Exxon is a stronger stock in the energy sector, it’s still part of the sector; one which is feeling serious pain as a result of low oil prices. So, in this particular case, the proper question isn’t “How long is Exxon Mobil likely to continue to see declines?” It’s more like “How long is oil likely to continue to fall?” With that said, it’s important to know why oil is falling. In the simplest of explanations, here’s how it all works…
First and foremost, it’s important to understand that like most commodities, the value of oil is at the mercy of supply and demand. Therefore, when oil supplies are low and demand is high, we tend to see increases in the value of the commodity. Adversely, when the supply of oil is high and demand is low, we tend to see declines in the value of what was once called “black gold”. Keeping that in mind, here are a few important things that you should know about oil’s supply and demand…
Supply Is Out Of Control – When it comes to oil supplies, you may have heard the term supply glut thrown around from here to there. That simply means that supplies are so high that even with demand as it sits, supply isn’t falling. That’s exactly what’s happening right now. In fact, the world produces millions of barrels of oil per day more than it uses. While this is a worldwide problem, and everyone knows the solution, no one seems to want to take action. The reality is that even in low priced oil markets, oil production countries want to continue producing as much oil as humanly possible. Ultimately, they want to maintain their control over their piece of the market. So, the larger producers in the world including Saudi Arabia, the United States, and others aren’t backing down. Therefore, supply continues to outpace demand. Which brings us to the next point I have to make here…
Demand Isn’t High Enough – The title of this bullet says it all. Demand for oil simply isn’t enough to keep up with supply. However, if you look at the reason for the low demand, you can see that it’s not likely to change any time soon. You see, demand for oil depends heavily on economic conditions. In general, when economic conditions around the world are positive, consumers spend more money on energy, gas for their cars, and more oil dependent products. However, when economies are struggling, one of the first places consumers tend to cut back is on oil. Well, several economies around the world, including China, Europe, and more than 20 others have fallen on hard times. Unfortunately, many of these economies are some of the economies that tend to have the highest demands for oil; ultimately driving the price of the commodity way down.
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