Stock market question.

[HarleyDog]

I have shares of XOM (Exxon Mobile). The price of oil dropped to -$25 a barrel. I would assume a negative price is similar to that of a negative interest rate, but I don’t understand the impact of either, if they are related. Exxon dropped 4.7%, but after market is up 1.6%. So what am I missing? Yes, I’m going to research it further, but was hoping for some good imput.

[fredtoast]

I am no expert on oil futures, but I believe the price becomes negative when it cost more to store the oil than it is worth on the market.  During The Great Depression when the price of corn went negative farmers were burning corn to heat their homes instead of fire wood.

As long as oil prices are this low XOM will be low.

[Goalpost]

Fred is essentially right. Only about 7 percent of the people who invest or contract this way were still in this future's contract. The rest had gotten out. What happened...these people had to pay to not receive goods. It's like you pay Amazon to ship something to your door, and then when it arrives, you have to pay to have it taken away.

[HarleyDog]

I'm not invested in the futures. I just have equity shares of the company itself. I guess what both of you are saying makes sense because you can't just shut off an oil well and if there is no place for it to go, you now must pay to have it removed. My actual stock price has not been destroyed thank goodness, but they are sure going to be losing some money during this phase. I don't see it getting much better until this economy fires up and we start burning fuels.

[Benton]

(04-21-2020, 02:09 PM)HarleyDog Wrote: I'm not invested in the futures. I just have equity shares of the company itself. I guess what both of you are saying makes sense because you can't just shut off an oil well and if there is no place for it to go, you now must pay to have it removed. My actual stock price has not been destroyed thank goodness, but they are sure going to be losing some money during this phase. I don't see it getting much better until this economy fires up and we start burning fuels.

Then it shouldn't effect you much. Their stock will continue to go up because we'll keep bailing out any loss.