Earlier in the month, Oil reached historic levels. More specifically, negative levels. In essence, this meant that producers were paying buyers to take oil from them. This was specific to U.S oil prices. Around the world, the average was just below its 30 year low. One of those is the world’s largest producer of oil, Saudi Arabia. And the drop has shown in its recent quarterly reports.
What led to such a crash?
Simply put, there was need or demand for it and the producers had nowhere to store it. With COVID-19 leading to mass lockdowns, people are not using their cars or flying around the world and this has led to unprecedented low demand for oil. But though there is no demand, producers continue to produce oil and now their refineries are nearly full.
Saudi Oil Report
Companies are beginning to release their financials. Investors do not expect much is just hoping that the damage is not as bad as some have suggested. This stems from the recent economic lockdown across the world which has led to little production and diminishing demand.
Now Saudi financials show that the first quarter of the year has seen a 24% drop. This is a major drawback for the region which depends on this for its main budget.
Oil To Begin Rising
Fortunately, it does not get worse than this. In Europe, China, and America, the lockdowns are being eased. This means that people will be going to work and around leading to demand in oil. Although the world is months away fro flying, which is a primary consumer of oil, cars will give a much-given relief. to oil producers.
Over the coming months, we expect that the losses will ease up and prices will begin to crawl. For some investors, this is time to be smart and buy some stock in the oil industry and wait to cash in going up.