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Will $60-Oil be a Reality Soon? ETFs to Avoid

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OPEC and non-OPEC oil producers finally clinched a deal on December 10 – first time since 2001 – to curb production. Prior to this, on November 30, OPEC leaders signed the oil output cut deal for the first time in eight years and succeeding in the third attempt this year (read: Top ETF Stories of November: Spotlight on Election & OPEC).

The apparent hurdles to the OPEC deal – Iran and Iraq – also came in tune with others and decided to slash production by about 1.2 million barrels a day from January to about 32.5 million barrels for six months (read: OPEC Finally Cuts Output: Energy Stocks & ETFs Up 10% or More).

Now, non-OPEC producers vowed to reduce “output by 558,000 bpd, short of the initial target of 600,000 bpd but still the largest-ever contribution by non-OPEC countries.” Of this, Russia will slash 300,000 bpd gradually, as per Reuters.

The latest move has given a boost to both WTI and Brent futures by about 5%. Analysts are of the view that $60-Oil may soon be a reality. However, some analysts also believe that oil price will not go beyond the $60 per barrel mark as this will once again bring back competition in the space.

While the output cut deal is good for oil and energy related ETFs, this can be damaging for some other kind of investments. In this light, investors may consider avoiding the ETFs mentioned below:

PowerShares Dynamic Leisure and Entertainment ETF (PEJ - Free Report)

High energy prices mean less disposable income for consumers. Consumers who became used to shelling out less on gas stations, would see less savings to splurge on discretionary items. This trend may hurt this leisure ETF.

VanEck Vectors Oil Refiners ETF (CRAK - Free Report)

Investors should note that companies in the refining segment benefit from lower oil prices as crude is one of their main input costs. As a result, this oil refiner ETF would be hit by a rise in oil prices (see all energy ETFs here).

SPDR S&P Transportation ETF (XTN - Free Report)

Since energy costs form a major portion of the overall costs of the transportation sector, transportation ETF would likely be hard hit.

iShares India 50 (INDY - Free Report)

An oil price rebound will spell trouble for this emerging market. Notably, India imports more than 75% of its oil requirements, thus being highly susceptible to oil prices (read: What Lies Ahead for India ETFs?).

iShares MSCI Japan (EWJ - Free Report)

Japan is the world's largest liquefied natural gas importer and third-largest net importer of crude oil and oil products, as per EIA. Due to its scarce resources, Japan needs to import almost all its energy requirements.

iShares MSCI South Korea Capped (EWY - Free Report)

South Korea too depends heavily on crude oil imports for about 97% of its requirements. Quite expectedly, rising oil prices could have an adverse impact on its economy, indicating some likely losses for this country ETF.

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