Finally… it looks like there’s a light at the end of the COVID tunnel.
Yeah, there’s the news out of India and Japan. That’s horrible to hear.
But on the bright side, the US and China are making great strides in reducing the prevalence of the virus.
The economy might be back on track, and so too could be oil…
In fact, some investment banks have predicted that crude oil prices could hit $80-$85 in the second half of this year as Europe (and many other regions) emerge from lockdowns and intercontinental aviation picks up.
Oil traders need look no further than the heavy travel season coming up.
Last year, air travel was down because of the virus. I remember when you could get plane tickets at a fraction of the regular price if you were willing to risk exposure to COVID (before we knew much about it).
But with more knowledge of the virus, case numbers receding, and vaccines rolling out, people are eager to get back to normal life.
And normal means traveling. Memorial Day is on the horizon, after all.
Oil and Travel Season
We’re already seeing the data to reflect people’s burning desire to get out and travel.
A TSA report shows a steady increase in airline passengers that began in January and hasn’t stopped. March saw 1.2 million passengers per day come through US airports. In April, that jumped to 1.4 million.
And that’s not all: jet fuel demand jumped up from 1 mb/d in March to 1.2 mb/d in April. People are steadily returning to air travel!
Plenty of investors have caught on. Hedge funds are placing bullish bets on oil futures as data comes out showing increased manufacturing.
I actually talked about this in a recent piece — because of COVID, people are less willing to jump on public transit. You know, the germs and stuff. Data showed increased car sales dropped in 2020 (because no one could go anywhere), but they’re picking up again.
Yes, a lot of that is electric cars, but gas cars are being sold, too. More on green energy stuff in a second.
We can look at the oil companies themselves, too, for more optimism. Many energy firms are boosting their dividend, and none are cutting them so far. Sounds like they’re seeing strong growth coming out of the pandemic.
Green Energy
Ok, but what about all the green energy pushes?
Yes, those are happening, but I don’t think those will affect the oil market for a longer time than what’s going on right now. Still, they’re worth considering because they create new opportunities for energy traders.
One of the biggest renewable energy projects I learned about recently is a massive 350-megawatt solar plus battery storage project in the California desert.
The Department of the Interior just approved this $550 million project, called the Crimson Solar Project, and a subsidiary of Canadian Solar (NASDAQ: CSIQ) will be working on it.
Of course, there’s the EV world — and there’s plenty to talk about there.
For one, we’re seeing big companies put their money into innovative startups. For example, Ford and BMW just dumped $130 million into solid-state battery startup Solid Power, demonstrating their confidence in the firm to deliver.
Meanwhile, EnergyX just raised $20 million in Series A funding to finance technological developments in lithium extraction. Should their work succeed, lithium would see a boost in production, making it cheaper and easier to make EVs.
But here’s a piece of news I found especially interesting: Europe’s first big hydrogen hub could be on the way.
The great thing about hydrogen is that there is so much of it. The problem is it doesn’t appear much on its own, but rather, it’s attached to other molecules (you know, two hydrogens and one oxygen make water).
The most efficient way we have to produce hydrogen right now is to rely on fossil fuels. Some projects use waste carbon dioxide to keep pollution down, but this remains untested at a large enough scale to be useful. Hydrogen can be extracted with other renewable sources, but those are currently costlier.
That said, they can draw on a range of energy sources, produce hydrogen while lowering reliance on solely fossil fuels.
Anyways, The Port of Rotterdam is working hard to become Europe’s first big hydrogen hub and one of the most advanced green hydrogen production centers on earth as part of the EU’s Hydrogen Strategy.
It’ll be interesting to see where that goes.
Overall, the future looks pretty exciting for the energy market. Hopefully, we get out of this COVID situation as fast as possible so life can return to normal, too.
Unrelated:
If you’d like to learn more about how I trade in the energy markets…
Check out this training webinar where I explain things in more detail.