When the world came to a standstill in 2020, oil companies like Exxon Mobil were at a loss. Literally.
Background: Exxon Mobil are a multinational oil and gas company. And when the world came to a standstill in 2020, oil companies like Exxon Mobil were at a loss. Literally.
What happened: The price of oil tanked to below $0 in April 2020, and Exxon had to slash 1/10th of its workforce. But as the world opened up, oil became a hot commodity once again.
What else: Now, oil prices are near a seven-year high. And now, Exxon Mobil's annual profits hit US$23 billion - the highest level since 2014. It's all part of the cycle of the industry.
💡A cyclical stock is a stock that's price is affected by economic changes. In other words, they follow the cycle of the economy. When the economy's up, these stocks boom. When the economy is down...ya get the picture.
💡Because of their cyclical nature, these stocks can be pretty volatile. And generally, the oil market is cyclical because oil demand correlates with economic growth.
💡When the economy is good, people can afford to buy petrol...even when it's exxy. So, as the economy opened up, so did the potential for profits at companies like Exxon Mobil.
Sign up for Flux and join 100,000 members of the Flux family