Shares in Saudi Aramco bounced back to pre-oil price war levels after gaining as much as 3.09% on Tuesday, an encouraging sign that oil demand may be gaining again and a global glut of crude is beginning to clear.
Aramco’s stock price has not been at this level since March 5, just before Saudi Arabia and Russia failed to come to an agreement on the output cuts which triggered an output surge that flooded the market.
Saudi Aramco is the first major oil producer to see its share price rebound to trade at levels last seen before the price war, Business Insider notes. “Aramco shares have been lifted by the price of crude oil and the company’s commitment to its dividend. On May 12, the company said it would still pay its dividend despite a slump in first quarter profits.”
Saudi Aramco’s stock price.
The OPEC+ group of countries agreed to an unprecedented production cut on April 12 after oil’s price tumbled on a supply glut and decimated demand as countries shuttered to prevent to spread of the Coronavirus. The group announced a production cut of 9.7 million barrels a day in May and June, the deepest cut ever agreed to by the world’s oil producers.
That cut appears to be working. Oil’s price has rebounded from late April lows. On the U.S.-based WTI, oil reached a low of $11.57 on April 21 to $33.08 today, May 20th. On the Brent index, oil touched a low of $19.33 on April 21, and is now trading at $35.86 today.
The increase in price is also due to rebounding demand despite the economic shutdowns worldwide to prevent the spread of the Coronavirus. In China, demand has nearly rebounded to pre-Pandemic levels.
Saudi Aramco is still down 5.4% year-to-date.
