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Oil analysts forecast a sustain rally as OPEC opposed calls to boost supply. OPEC and non-OPEC partners, a group collectively referred to as OPEC+, said they would adhere to their current agreement for a gradual increase in oil supply.
The group’s decision was widely expected, although some expected an urging from the United States and India to control soaring oil prices. U.S. President Joe Biden’s administration had previously called on OPEC and its allies to increase oil output so that rising gasoline prices do not contribute to soaring inflation in America. Meanwhile, India — a huge consumer of oil — imports about 80% of its total energy requirements. No wonder, both countries will seek a lower oil price.
Oil prices climbed to multi-year highs shortly after a group of some of the world’s most influential oil producers walked opposite the path of material supply boost. OPEC+ said it had “reconfirmed the production adjustment plan” in a statement published online shortly after relatively swift ministerial talks. This referred to its former decision to add 400,000 barrels per day to the market for the month of November.
Analysts started forecasting that crude prices could rally as high as $100 a barrel. WTI crude oil stands at $78.42 a barrel at the time of writing. Both WTI and brent crude oil contracts are up around 60% since the start of the year. Meanwhile, global supply was disrupted by hurricane outages and low investment.
The recovery in global oil demand from the coronavirus pandemic has been faster than expected. A volley of vaccines from various producers like Pfizer, Moderna, AstraZeneca and Jhonson & Jhonson as well as an antiviral therapy from Gilead Sciences seem to be demand creators.
Most recently, the news highlighting positive updates on Merck & Co. Inc. (MRK) and Ridgeback Biotherapeutics’ investigational oral antiviral medicine, molnupiravir has also been hogging attention (read: ETFs to Play the Reopening Trade on Merck's Oral Antiviral Pill News).
In mid-September, analysts at Bank of America Global Research said that the bank could bring forward its $100 per barrel oil price target if temperatures are colder than expected during the winter, according to Reuters. This prospect, the analysts reportedly said, could drive a surge in demand and widen the supply deficit.
Against this backdrop, investors can play the below-mentioned ETFs.
ETFs in Focus
Energy – Energy Select Sector SPDR Fund (XLE - Free Report)
This is the most obvious choice. If oil price is staging an uptrend on higher drawdown, oil exploration and production stocks are sure to benefit as these companies will have a chance to pump more oil over the medium term. Plus, the fund yields 3.95% annually.
Big banks raised concerns in the pandemic-ridden 2020 about severe economic downturns and worsening credit quality. With oil prices suffering that time, there was the likelihood of a rise in delinquency rates from the energy companies. With the situation in the oil patch improving and bond yields rising (with Fed taper talks), banks now have every reason to cheer.
Steel producers underperform if oil prices crater. The industry supplies materials to build and expand oil drilling operations. Since an oil price rally can result in more capital expenditure by drillers, steel stocks should soar even higher.
Country– VanEck Vectors Russia ETF
Russia is the world’s one of the largest producers of oil (14% of world output) and natural gas (18%) and will thus benefit big time if oil continues to stage a rally ahead.
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Oil to Stage Prolonged Rally? ETFs to Buy
Oil analysts forecast a sustain rally as OPEC opposed calls to boost supply. OPEC and non-OPEC partners, a group collectively referred to as OPEC+, said they would adhere to their current agreement for a gradual increase in oil supply.
The group’s decision was widely expected, although some expected an urging from the United States and India to control soaring oil prices. U.S. President Joe Biden’s administration had previously called on OPEC and its allies to increase oil output so that rising gasoline prices do not contribute to soaring inflation in America. Meanwhile, India — a huge consumer of oil — imports about 80% of its total energy requirements. No wonder, both countries will seek a lower oil price.
Oil prices climbed to multi-year highs shortly after a group of some of the world’s most influential oil producers walked opposite the path of material supply boost. OPEC+ said it had “reconfirmed the production adjustment plan” in a statement published online shortly after relatively swift ministerial talks. This referred to its former decision to add 400,000 barrels per day to the market for the month of November.
Analysts started forecasting that crude prices could rally as high as $100 a barrel. WTI crude oil stands at $78.42 a barrel at the time of writing. Both WTI and brent crude oil contracts are up around 60% since the start of the year. Meanwhile, global supply was disrupted by hurricane outages and low investment.
The recovery in global oil demand from the coronavirus pandemic has been faster than expected. A volley of vaccines from various producers like Pfizer, Moderna, AstraZeneca and Jhonson & Jhonson as well as an antiviral therapy from Gilead Sciences seem to be demand creators.
Most recently, the news highlighting positive updates on Merck & Co. Inc. (MRK) and Ridgeback Biotherapeutics’ investigational oral antiviral medicine, molnupiravir has also been hogging attention (read: ETFs to Play the Reopening Trade on Merck's Oral Antiviral Pill News).
In mid-September, analysts at Bank of America Global Research said that the bank could bring forward its $100 per barrel oil price target if temperatures are colder than expected during the winter, according to Reuters. This prospect, the analysts reportedly said, could drive a surge in demand and widen the supply deficit.
Against this backdrop, investors can play the below-mentioned ETFs.
ETFs in Focus
Energy – Energy Select Sector SPDR Fund (XLE - Free Report)
This is the most obvious choice. If oil price is staging an uptrend on higher drawdown, oil exploration and production stocks are sure to benefit as these companies will have a chance to pump more oil over the medium term. Plus, the fund yields 3.95% annually.
Financials – SPDR S&P Bank ETF (KBE - Free Report)
Big banks raised concerns in the pandemic-ridden 2020 about severe economic downturns and worsening credit quality. With oil prices suffering that time, there was the likelihood of a rise in delinquency rates from the energy companies. With the situation in the oil patch improving and bond yields rising (with Fed taper talks), banks now have every reason to cheer.
Steel – VanEck Vectors Steel ETF (SLX - Free Report)
Steel producers underperform if oil prices crater. The industry supplies materials to build and expand oil drilling operations. Since an oil price rally can result in more capital expenditure by drillers, steel stocks should soar even higher.
Country– VanEck Vectors Russia ETF
Russia is the world’s one of the largest producers of oil (14% of world output) and natural gas (18%) and will thus benefit big time if oil continues to stage a rally ahead.