And new cases of the virus in Brazil, India, Russia, and Mexico are still exploding.
This is leading to renewed fears of potential state and country closures like what we saw from mid-March to early May.
If these happen again it means much lower demand for oil again. The fear of this happening again is why prices of crude oil fell again today.
From $40.37 per barrel yesterday to $37.98 per barrel as of this writing. Or a loss of 5.9%.
Another reason oil prices are falling again is because the Energy Information Administration reported on June 24th that oil inventories rose for the 3rd straight week. This week’s increase was by 1.4 million barrels.
This increase surprised analysts and investors alike because most of them projected a weekly decline of 100,000 barrels. Not an increase of 1.4 million barrels.
It’s an understatement to say their projections were way off.
Back on June 12th, I detailed the last few months price activity on oil. And what this means for you as an investor.
The main thing affecting oil prices then is the same as today and it boils down to this…
This surprising rise was due to continued lack of demand with people not driving or traveling as much. Combined with still too much production for the current lower level of demand.
There is still too much supply compared to the amount of demand… This is why storage levels are decreasing. And this is what’s driving oil prices down.
But this becomes especially important now due to the now large increases in coronavirus cases worldwide.
If cities, states, and governments worldwide lock things down again oil prices will crater like they did on April 22nd where they reached negative levels for the first time ever.
I don’t know if they’ll go negative again but that doesn’t matter.
What does is that at today’s price per barrel most oil companies worldwide aren’t profitable. I outlined why in the June 12th article linked further above.
And if oil prices crater again it could mean devastation for the oil industry.
I want to end this article like I ended the one on June 12th because it still fits…
What This Means For You
Oil price volatility is back.
So are major concerns about the US and global economy related to continued low demand, consumption, and travel due to the coronavirus.
These reasons are why oil prices are falling again.
Look to fill up your gas tank cheaper in the coming days as we enter the traveling season here.
Keep an eye on any investments you have in the oil and gas arena… Specifically watch for companies having too much debt in relation to their cash.
We’re now 3 months into this crisis… Things are bad now. And if people don’t get back to normal entire industries could crumble.
Goldman Sachs even warned that the U.S. shale oil industry could collapse on June 11th, 2020.
To learn about some of the other impacts the coronavirus is taking on our economy check out the following articles to see how this will affect you and the entire economy…
Now almost 4 full months into this crisis we’re back in a similar place… But it’s now worse.
Companies now have one more months less revenue, cash flow, and profits. And this puts oil companies in even more danger than they were in just weeks ago.