Oil prices have hit a record-breaking low during COVID-19. With the basic principles of supply and demand, many big oil companies have run the industry far below the $0-dollar mark.
For a long time, it wasn’t certain when the industry would pull-out of its price free fall. Now, a light has been showing at the end of the tunnel. States that are starting to reopen have now seen an active increase in fuel purchases.
Oil Prices Dropped Below $0 Per Barrel
COVID-19 threw a stick in the wheel of virtually every industry on the planet. For big oil, this is devastating.
Two of the worlds largest producers of oil (Saudi Arabia and Russia) went into a heated production war. With each country bidding to be the highest producer, the expectation was to lower the price of oil. This would remove the cap that each country had and allow them to produce an infinite amount of fuel.
This happened just before COVID-19 hit the world. With everyone staying inside, the oil industry felt the painful sting of low demand. One of the largest global industries was now beckoning for people to go out, travel and drive. Most importantly the airline industry has seen an 88% decrease in travelers. With such a high supply of oil, the cost took a nosedive.
State Reopening Cause Oil Consumption
While states are currently reopening, many are hitting the road. Transportation to and from multiple places across the country is increasing as well as fuel consumption. Many citizens in cities that are slow-opening are getting back into the daily routine and are back at the pump.
With this new process, the oil industry is starting to see its extensive reserves moving back into the world. Where companies like WTI have had to pay just to have another company take oil, they are starting to see the excess oil starting to flow.