Inflation will take oil prices a lot higher

[dan_s]

First quarter’s real GDP number was 6.4%, following 4.3% in the fourth quarter. The economy is booming. Housing is up 11%, business equipment investment advanced 10%, and aggregate demand called private domestic final sales was up 11% annualized in the first quarter.

That is a boom. But the inflation rate in the first quarter came in at 4.1%. Not good. So nominal GDP is up 10.7%. That’s real output plus inflation, and that’s really way higher than a 1.6% Treasury bond.

During periods of high inflations, owning stock in companies with lots of "real assets" like proven oil and gas reserves is wise.

Oil prices fell more than 2% on Friday, with WTI crude settling around $63.50 a barrel on concerns that a deepening coronavirus crisis in India may dent oil demand. On the supply side, the OPEC+ stuck to their plans for a gradual easing of oil production curbs from May to July, after the group raised its demand growth for 2021 to 6 million bpd. Also, the EIA Petroleum Status Report showed the US crude stocks rose less than expected last week. Still, WTI ended the week on a high note, and, looking for how it performed in April, the US benchmark rose more than 7% as optimism about robust demand recovery in the second half of the year outweighed concerns about the impact of soaring COVID-19 cases in India, Japan and Brazil.

NYMEX natural gas futures were trading around the $2.90/MMBtu level in the last week of April, moving away from the $3.00/MMBtu region after a government report showed that US stockpiles increased more than expected last week. Still, the commodity has rallied more than 10% so far in April, heading for its best month since October last year, on the back of higher heating demand, record exports and a recent decline in production.