Dealing with the effects of the COVID-19 pandemic — physically, mentally, emotionally and economically — has been a long, slow grind.
There’s no doubt that the past year and a half has been among the worst periods of time many of us have experienced.
But finally, we’re climbing our way out of this mess.
We’ve learned a lot about this virus ever since it spread across the world.
We’re now able to treat those with severe symptoms better, and there are a few different vaccines now available.
These events are providing support for an economic recovery, despite some of the worries about inflation and economic stagnation.
For example, unemployment claims are decreasing, both through the re-opening of the economy and the elimination of expanded benefits that many states are adopting.
In fact, data from Thursday showed that the number of Americans filing new claims for unemployment benefits dropped more than expected last week.
In particular, The U.S. Department of Labor stated there were about 406,000 initial jobless claims the week-ended May 21 — below the 425,000 that some economists polled by Dow Jones had previously forecasted.
Additionally, the Commerce Department released a separate report showing we achieved a 6.4% annualized growth rate last quarter.
Now, I’ve previously discussed how yanking unemployment benefits can actually “hurt” the economy and the markets temporarily.
See, pumping money into the economy gets people spending, so traders expect prices to go up.
Once those benefits go away, the free money dries up, and the economy might see a bit of a contraction.
But that kind of “growth” that government handouts provide is short-term.
If businesses are allowed to open back up and people start earning money again, the economy can overcome that contraction and continue growing in a real way.
Of course, economic growth is good news for the energy market. But these abstract numbers aren’t the only thing driving oil prices higher.
It’s travel season.
Traders are already anticipating and pricing in a spike in oil demand — some forecasts predict up to 100 million bpd — as the summer driving season hits in the U.S. and Europe. Obviously, air travel adds to the demand as well.
Combine the summer travel season with people finally able to get out of the house and vacation away that pandemic stress, and I bet we’ll see demand increase like no other.
There are two slight concerns about oil prices dealing with supply: Iran specifically and OPEC+ in general.
As you may know, the U.S. and other nations are negotiating with Iran to revive the 2015 nuclear deal that President Trump withdrew the U.S. from during his term.
We slapped Iran hard with sanctions (including on oil). If the deal is revived, we’d likely lift most of these sanctions, bringing a ton of supply onto the market and lowering prices.
However, the massive expected demand is outweighing the Iran concerns, given the already-rising oil prices.
As for OPEC+, they’re meeting on June 1 to discuss how they’ll strike a balance between increasing production in the face of demand without flooding the market too much if Iranian sanctions are lifted.
They’ll have to review whether they should change production plans in case Iran’s oil becomes available.
Still, traders are expecting OPEC+ to continue their gradual production increase.
Overall, these concerns are short-term matters.
Many traders seem to believe that the massive potential demand increase will outweigh any supply increase in the long run.
Not to mention that OPEC+ effectively controls supply, so they can meet and decide to cut production to alleviate supply problems.
Want to position yourself to potentially profit off the economic reopening and coming oil demand spike?
I’ll show you my system for doing so.
>>>Click here to learn more about my trading strategy in a special training video.