This Is Why Oil Is Set To Rise In 2H 2021

Among those who worked in February 2020, 28.6% earned less in the week from January 6th to the 12th. Among those who were working in February, 2/3rds work for the same employer. 1/3rd work for a different employer or don’t work at all. The net increase in employment since April and May has mainly come from a growing number of people working for a new employer rather than those working for their old employer.

We think when the economy reopens, a bunch of people will go back to working for their old employer as old-economy businesses will come back. Make no mistake about it, this needs to happen because the economy is in rough shape without a large part of the service industry.

Oil Is About To Have A Great 2nd Half

Oil currently has a $52 handle which is much above the negative reading it briefly had last spring. It’s not nearly where it is about to reach when demand fully comes back because supply won’t meet it. Some intermediate term oil bulls are actually bearish on the next few months because demand will stay muted. They have been surprised by the recent strong price action. 

As you can see from the chart above, the global inventory surplus has fallen 57% yearly in 17 weeks. That’s a 255 million barrel decline which is 2.1 million barrels per day. You can see the past few weeks have seen the decline accelerate despite the spike in COVID-19 cases in December. There should be a spike in oil prices when inventory levels get back to pre-virus levels and investors realize there hasn’t been much investment in new projects in the past few quarters. Oil is priced on the supply/demand for the marginal barrel.

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