Stock Learning Challenge - Day 1

Recently, stock values for companies that produce oil and gas have become volatile.

Why is this happen?

Projected Revenue
Stock value is driven by many factors, one of which is projected revenue. In this context, revenue from a company that produces oil and gas is driven by volume and price. So, the stock value goes up if volume or price spikes.

Cyclical Commodities
Oil and gas are fungible commodities, meaning they are interchangeable and needed everywhere. This also means the price in one place will be the same as in another country. Yuppp, it purely represents the global supply and demand balance. That is why they are categorized as cyclical commodities.

The Supply Shock
Recently, supply has decreased. As we know, geopolitical clashes (like tensions involving the US and Iran) threaten to close the strait of Hormuz, which is responsible for 20-25% of global oil and gas trade. As a result, supply decreases (due to the blockage) while demand remains steady (people still need fuel anyway wqwq), and this results in inevitable price increases.

In the end, when global oil and gas prices spike, these companies margins are expected to expand instantly. As an investor, this also brings hope for bigger dividends (or expand) in the future.

$MEDC $ENRG