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Commodities

Who Benefits From Low Oil Prices?

Commodities
Who Benefits From Low Oil Prices?

The May futures contract of West Texas Intermediate (WTI) crude fell into unchartered territory on Monday, with sellers willing to pay buyers $37.63 a barrel to take delivery. Who gains from low oil prices?

Broker of the month
22 April 2020 | HYCM –It was hard to believe that oil prices would hit zero. It was even harder to see how oil prices went below zero on the May contract’s expiry! With June following where May went, who benefits with low oil prices?

3 beneficiaries of low oil prices

1# The first beneficiary is the consumer. When the wheels finally start turning again then oil prices will remain low for at least an initial period. The fact that storage levels are so high means that even as demand picks up prices will remain suppressed for some time.  So, when economies get moving again, this will mean a bit of extra cash leftover from the trip to the gas station.

2# Countries running oil deficits will benefit too. India’s bonds are expected to outperform according to JPMorgan and South Africa is expected to see some pressure ease on their foreign debt levels as the Rand gains strength.  On top of these countries, the larger oil importers will benefit too. Many of the larger nations have used the low oil prices as good times to top up their reserve level, so the consumer benefit will also be mirrored by country benefit too.

3# Corporations will gain from lower oil prices. Many companies use oil at some point in their production process, even if it is only to transport goods to the market. Many of these companies will benefit from a reduction in their oil bill.
So, a few of the likely winners even as some pretty hefty losses are on their way for many oil giants. This has been a week to remember for the oil market as demand continues to dry up.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.

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