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ETFs to Play on Surprise Output Cut Decision By OPEC+
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Last Sunday Organization of the Petroleum Exporting Countries with Russia and other allies (OPEC+), announced that it will be slashing oil outputs by 1.16 million barrels per day. The voluntary cut will last till the end of this year starting from May.
The output cut is in addition to the 2 million barrels per day cut announced last October by the oil cartel. Per Reuters, the latest announcement brings the total output reduction to 3.66 million barrels per day (bpd), which roughly equals 3.7% of the global demand.
Among the member nations, Iraq announced that it would be reducing the output by 211,000 bpd, followed by a 144,000-bpd reduction by the UAE and a 128,000-bpd reduction by Kuwait. Russian officials also issued a statement, stating that they will also be extending their production cut for the entire year.
Oil price was already on the rise last week after Iraq was forced to halt 450,000 bpd of crude export from the Kurdistan region. Prices also rose on account of the U.S. inflation data showing inflation slowing in the United States. This could lead to less aggressive interest rate hikes and boost the economic growth outlook and oil demand.
Oil Prices Jump on Output Cut Decision
Oil prices surged around 8% on Monday in an immediate response to the output news cut, intensifying inflation fears and increasing the possibility that the Fed will remain hawkish for longer. According to a Reuters article, Brent crude scaled $5 a barrel on Monday. Oil majors like BP (BP - Free Report) , Shell (SHELL), TotalEnergies (TTE - Free Report) and Eni (E - Free Report) all jumped about 4%.
The surprise announcement by OPEC+ also pushed the probability of the Fed hiking interest rates by 25 bps in May. The production cut could result in a long-term rise in the price levels, which if it lasts, could give fuel to already high inflation, complicating decisions for the central banks.
The greenback also gained against the Japanese yen. The greenback got a boost agaisnt the backdrop of increased global inflation fears. The move caused the Asia-Pacific markets to open on the upside, while the European markets gave mixed reactions. The European Oil & Gas Index was up around 3.7%, marking its largest one-day gain since last November.
The production cut also increases geopolitical concerns and instability. On top of the already complicated political stance between Russia and the West, it could also complicate relations between Washington and Riyadh.
Other Factors That May Push Up Oil Prices Further
Apart from the production cut, the recovery of global oil demand from China’s reopening will also likely boost oil prices. Per CNBC, about 38.5% of global oil demand recovery is likely to come from China.
According to a WSJ article, many global oil and gas giants are expanding their investments in the energy infrastructure of North Africa on the backdrop of increased demand from the European nations. With a more stable political climate than before, North Africa has opened up more avenues for investments in energy infrastructure.
ETFs in Focus
Given this scenario, let’s take a look at the ETFs that can be intriguing bets in the energy market.
The Energy Select Sector SPDR ETF, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. The fund holds 23 securities in its basket with Exxon Mobil Corporation (XOM - Free Report) being the top holding having a share of 23.05%.
The fund has jumped around 5.06% since last Friday and gained 17.16% over the past year. XLE has amassed $39.8 billion in its asset base and charges an annual fee of 10 bps. It has a trading daily average volume of around 21 million shares.
The Vanguard Energy ETF employs an indexing investment approach designed to track the performance of the MSCI US Investable Market Index (IMI)/Energy 25/50. It is a passively managed fund having a basket of 112 securities. Exxon Mobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) are the top two holdings of the fund, with a share of 22.34% and 15.72%, respectively.
VDE has jumped around 4.8% since last Friday, giving returns of 15.3% over the past year. The fund has gathered $7.59 billion in its asset base and levies an annual fee of 10 bps. It has a trading daily average volume of about 503,000 shares.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report)
The SPDR S&P Oil & Gas Exploration & Production ETF seeks to replicate, as closely as possible, before expenses, the total return performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The fund has 59 securities in its basket, with Valero Energy Corporation (VLO - Free Report) taking the top spot, having a share of 2.43%.
XOP, since last Friday has scaled up by almost 4.9% but has given negative returns of 0.45% over the past year. The fund has an asset base of $3.65 billion and charges an annual fee of 35 bps. It has a trading daily average volume of 5.46 million shares.
The First Trust Energy AlphaDEX ETF is an exchange-traded fund that seeks investment results that generally correspond to the price and yield, before fees and expenses, of the StrataQuant Energy Index. The fund has a basket of 40 securities. Coterra Energy (CTRA - Free Report) and PDC Energy are the top two holdings, with a share of 4.58% each.
FXN has jumped 3.65% since last Friday and has gained 3.73% over the past year. The fund has gathered $713 million in its asset base and charges an annual fee of 61 bps. It has a trading daily average volume of about 3.06 million shares.
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ETFs to Play on Surprise Output Cut Decision By OPEC+
Last Sunday Organization of the Petroleum Exporting Countries with Russia and other allies (OPEC+), announced that it will be slashing oil outputs by 1.16 million barrels per day. The voluntary cut will last till the end of this year starting from May.
The output cut is in addition to the 2 million barrels per day cut announced last October by the oil cartel. Per Reuters, the latest announcement brings the total output reduction to 3.66 million barrels per day (bpd), which roughly equals 3.7% of the global demand.
Among the member nations, Iraq announced that it would be reducing the output by 211,000 bpd, followed by a 144,000-bpd reduction by the UAE and a 128,000-bpd reduction by Kuwait. Russian officials also issued a statement, stating that they will also be extending their production cut for the entire year.
Oil price was already on the rise last week after Iraq was forced to halt 450,000 bpd of crude export from the Kurdistan region. Prices also rose on account of the U.S. inflation data showing inflation slowing in the United States. This could lead to less aggressive interest rate hikes and boost the economic growth outlook and oil demand.
Oil Prices Jump on Output Cut Decision
Oil prices surged around 8% on Monday in an immediate response to the output news cut, intensifying inflation fears and increasing the possibility that the Fed will remain hawkish for longer. According to a Reuters article, Brent crude scaled $5 a barrel on Monday. Oil majors like BP (BP - Free Report) , Shell (SHELL), TotalEnergies (TTE - Free Report) and Eni (E - Free Report) all jumped about 4%.
The surprise announcement by OPEC+ also pushed the probability of the Fed hiking interest rates by 25 bps in May. The production cut could result in a long-term rise in the price levels, which if it lasts, could give fuel to already high inflation, complicating decisions for the central banks.
The greenback also gained against the Japanese yen. The greenback got a boost agaisnt the backdrop of increased global inflation fears. The move caused the Asia-Pacific markets to open on the upside, while the European markets gave mixed reactions. The European Oil & Gas Index was up around 3.7%, marking its largest one-day gain since last November.
The production cut also increases geopolitical concerns and instability. On top of the already complicated political stance between Russia and the West, it could also complicate relations between Washington and Riyadh.
Other Factors That May Push Up Oil Prices Further
Apart from the production cut, the recovery of global oil demand from China’s reopening will also likely boost oil prices. Per CNBC, about 38.5% of global oil demand recovery is likely to come from China.
According to a WSJ article, many global oil and gas giants are expanding their investments in the energy infrastructure of North Africa on the backdrop of increased demand from the European nations. With a more stable political climate than before, North Africa has opened up more avenues for investments in energy infrastructure.
ETFs in Focus
Given this scenario, let’s take a look at the ETFs that can be intriguing bets in the energy market.
Energy Select Sector SPDR Fund (XLE - Free Report)
The Energy Select Sector SPDR ETF, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. The fund holds 23 securities in its basket with Exxon Mobil Corporation (XOM - Free Report) being the top holding having a share of 23.05%.
The fund has jumped around 5.06% since last Friday and gained 17.16% over the past year. XLE has amassed $39.8 billion in its asset base and charges an annual fee of 10 bps. It has a trading daily average volume of around 21 million shares.
Vanguard Energy ETF (VDE - Free Report)
The Vanguard Energy ETF employs an indexing investment approach designed to track the performance of the MSCI US Investable Market Index (IMI)/Energy 25/50. It is a passively managed fund having a basket of 112 securities. Exxon Mobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) are the top two holdings of the fund, with a share of 22.34% and 15.72%, respectively.
VDE has jumped around 4.8% since last Friday, giving returns of 15.3% over the past year. The fund has gathered $7.59 billion in its asset base and levies an annual fee of 10 bps. It has a trading daily average volume of about 503,000 shares.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report)
The SPDR S&P Oil & Gas Exploration & Production ETF seeks to replicate, as closely as possible, before expenses, the total return performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The fund has 59 securities in its basket, with Valero Energy Corporation (VLO - Free Report) taking the top spot, having a share of 2.43%.
XOP, since last Friday has scaled up by almost 4.9% but has given negative returns of 0.45% over the past year. The fund has an asset base of $3.65 billion and charges an annual fee of 35 bps. It has a trading daily average volume of 5.46 million shares.
First Trust Energy AlphaDEX Fund (FXN - Free Report)
The First Trust Energy AlphaDEX ETF is an exchange-traded fund that seeks investment results that generally correspond to the price and yield, before fees and expenses, of the StrataQuant Energy Index. The fund has a basket of 40 securities. Coterra Energy (CTRA - Free Report) and PDC Energy are the top two holdings, with a share of 4.58% each.
FXN has jumped 3.65% since last Friday and has gained 3.73% over the past year. The fund has gathered $713 million in its asset base and charges an annual fee of 61 bps. It has a trading daily average volume of about 3.06 million shares.