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The energy sector has been on a tear this year on rising oil prices. Soaring demand, reducing supplies from Venezuela, Libya and Canada, threats of supply disruption from Iran due to U.S. sanctions, and of course the historic output cut deal between the OPEC, Russia and other producers are driving oil price higher. Additionally, global purchasing manufacturing indexes have been expanding, signaling strong oil demand and the resultant increase in prices. Strong earnings, falling inventories and state of backwardation in the oil futures’ market are adding to the sector’s optimism. However, resurgence in shale oil drilling is acting as a major headwind. Further, the OPEC and other countries recently agreed to a modest increase in output that could dampen the rally in oil prices and energy ETFs.

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