Why did energy stocks make such large leaps in Monday’s trading? Analysts give much of the credit to news of more coronavirus vaccine development.
Stocks continued shooting up in Tuesday’s trading and one explanation said it happened based on the hopes that vaccines will do something to diminish the large amount of stored crude oil and also result in an increased demand for gasoline.
Oklahoma energy joins were among those on Monday that saw their stocks leap as much as 14%. The stocks of several were better than 10%. On Tuesday, the same firms saw their stocks still surging in early trading.
Certainly since the start of the COVID-19 pandemic, the public travel in the U.S. has been slashed and gasoline demand plunged. So did the price of gasoline at the pumps. Just witness the price of a regular gallon of gasoline—$1.80 in Oklahoma and $2.11 nationally as of Tuesday.
The world was literally flooded with oil and gas because of the pandemic and if you recall, crude prices in the U.S. at one point last spring plunged to negative value. Consequently, the Cushing tank farm in Oklahoma became filled to the brim with crude oil as traders waited for better prices.
It boiled down to a matter of supply and demand. Demand slowly increased until recent weeks when the nation started experiencing a resurgence of COVID-19 cases. But as OK Energy Today reported last week, the Cushing crossroads of pipelines again was filling with crude oil. So, the excess of stored crude needs to be eliminated and there’s only one way thing that will cause it—increased demand….demand for gasoline by the motoring public and demand for jet fuel by the airline industry.
Shutdowns in some states have curtailed travel, not only by tourists and visitors but also by the residents of those states. New Mexico is under a two-week lockdown. Colorado has 20 counties at red alert as ski resorts, in some cases, have delayed the opening of their usually flourishing seasons. Condominiums are empty. Restaurants are limited to 25% occupancy.
Investors are apparently taking note of both the stored crude oil and of news that vaccine developers are moving rapidly to a level of distribution by the government. To the investors, it is positive news and gives rise to hope for increased demand of their product.