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Who gains from low oil prices?

HYCM

By Giles Coghlan, Chief Currency Analyst at HYCM

Oil low continues

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 gains with oil low?

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 mean 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 left over from the trip to the gas station.

Countries running oil deficits will benefit too. India's bonds are expected to outperform according to JP Morgan 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.

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 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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