Exxon Stock Plunge to March Low Amid Oil Demand Outlook
Exxon stock price suffered hefty losses in the last couple of months as investors are showing concerns over the global economic recovery. In addition, sluggish oil prices continue hammering investor’s sentiments.
Oil prices failed to move above the $40 a barrel level, meaning that the companies are experiencing difficulties in generating profits.
The majority of oil and gas companies have a breakeven point of around $50 a barrel. Oil prices have been lingering around $40 a barrel over the past few months. Consequently, the market analysts have started forecasting wider than expected loss for the third quarter.
According to Reuter’s calculations, Exxon’s third-quarter earnings per share could come around a loss of $0.68 to a profit of $0.07 per share. Previously, analysts’ were expecting its loss to stand around $0.07 per share for the third quarter.
Moreover, lower oil prices also raises questions over Exxon’s dividend stability. This is because Exxon’s cash generation is not enough to support dividends. The company has been relying on external sources for dividend payments.
“Given the challenging conditions, we expect a free cash flow shortfall during the quarter, calling into question how long the company can continue to use debt to fund its dividend,” says Edward Jones analyst Jennifer Rowland.
Crude oil price is currently trading around $38 a barrel after trading in a narrow range of $40 a barrel over the past two months. The latest oil price sell-off is supported by trader’s concerns over economic worries and the second wave of virus spread.
“It has become evident that the virus has not been contained. Infection rates are going up, the global death toll has surpassed the 1M mark and the world is becoming a gloomy place once again,” according to PVM Oil analyst Tamas Varga.
Exxon stock price is currently trading around the lowest level since March while shares of its closest peers including BP and Royal Dutch Shell plunged to the twenty-five years low.