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Oil & Energy ETFs Likely to Rebound in 2024: Here's Why
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The Organization of Petroleum Exporting Countries (OPEC) maintains a hopeful stance on the oil market's future, despite recent challenges. According to OPEC's December Oil Market Report, the demand for crude oil is expected to outpace the supply increase from non-OPEC sources. This optimism persists even amidst a recent decline in oil prices, which OPEC attributes to speculative actions and overblown concerns.
Investment Opportunities in the Oil Sector
Given OPEC’s strong expectations for oil demand, the current price level of around $70 per barrel presents an attractive opportunity. Investors with a long-term perspective can potentially benefit from investing in high-quality oil companies at these prices.
OPEC's Production Forecast and Strategy
OPEC forecasts a substantial increase in its own crude oil production needs, estimating a requirement of 29.68 million barrels per day (b/d) in the first quarter of 2024, compared to 27.84 million b/d produced in November. To manage market concerns, OPEC and allies, including Russia, plan to reduce production by 700,000 b/d. This approach is aimed at alleviating negative market sentiment and tightening global oil supply.
Economic Factors Supporting OPEC's Confidence
OPEC's confidence is reinforced by the global economy's performance, which has exceeded expectations in the first three quarters of 2023. The potential for accommodating monetary policies and improved geopolitical conditions further enhances this optimistic outlook. Key drivers for demand include robust global GDP growth, improved economic conditions in China, and growth in the OECD Americas.
Addressing Economic Risks and Speculative Market Behavior
OPEC acknowledges the risks of economic downturns in key consumer countries and challenges in China's oil demand. Notably, WTI crude ETF United States Oil ETF (USO) is off 5.1% past month (as of Dec 15, 2023). However, the organization views the recent drop in oil prices as primarily driven by speculation and unfounded concerns about demand growth.
Non-OPEC Production and Its Impact
OPEC notes the increase in oil production outside its group but maintains its growth forecasts for non-OPEC production at 1.8 million b/d in 2023 and 1.4 million b/d in 2024. The United States is expected to lead this growth, with other notable contributions from Brazil, Kazakhstan, Norway, Guyana, Mexico, and China.
ETFs in Focus
Against this backdrop, below we highlight a few energy ETFs that can be up for gains.
Invesco DB Oil Fund (DBO - Free Report) – Down 0.60% Past Month
United States Brent Oil Fund LP (BNO - Free Report) – Down 0.6% Past Month
VanEck Oil Refiners ETF (CRAK - Free Report) – Up 5.7% Past Month
Invesco Dorsey Wright Energy Momentum ETF (PXI - Free Report) – Up 2.8% Past Month
iShares U.S. Energy ETF (IYE - Free Report) – Up 1.0% Past Month
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Oil & Energy ETFs Likely to Rebound in 2024: Here's Why
The Organization of Petroleum Exporting Countries (OPEC) maintains a hopeful stance on the oil market's future, despite recent challenges. According to OPEC's December Oil Market Report, the demand for crude oil is expected to outpace the supply increase from non-OPEC sources. This optimism persists even amidst a recent decline in oil prices, which OPEC attributes to speculative actions and overblown concerns.
Investment Opportunities in the Oil Sector
Given OPEC’s strong expectations for oil demand, the current price level of around $70 per barrel presents an attractive opportunity. Investors with a long-term perspective can potentially benefit from investing in high-quality oil companies at these prices.
OPEC's Production Forecast and Strategy
OPEC forecasts a substantial increase in its own crude oil production needs, estimating a requirement of 29.68 million barrels per day (b/d) in the first quarter of 2024, compared to 27.84 million b/d produced in November. To manage market concerns, OPEC and allies, including Russia, plan to reduce production by 700,000 b/d. This approach is aimed at alleviating negative market sentiment and tightening global oil supply.
Economic Factors Supporting OPEC's Confidence
OPEC's confidence is reinforced by the global economy's performance, which has exceeded expectations in the first three quarters of 2023. The potential for accommodating monetary policies and improved geopolitical conditions further enhances this optimistic outlook. Key drivers for demand include robust global GDP growth, improved economic conditions in China, and growth in the OECD Americas.
Addressing Economic Risks and Speculative Market Behavior
OPEC acknowledges the risks of economic downturns in key consumer countries and challenges in China's oil demand. Notably, WTI crude ETF United States Oil ETF (USO) is off 5.1% past month (as of Dec 15, 2023). However, the organization views the recent drop in oil prices as primarily driven by speculation and unfounded concerns about demand growth.
Non-OPEC Production and Its Impact
OPEC notes the increase in oil production outside its group but maintains its growth forecasts for non-OPEC production at 1.8 million b/d in 2023 and 1.4 million b/d in 2024. The United States is expected to lead this growth, with other notable contributions from Brazil, Kazakhstan, Norway, Guyana, Mexico, and China.
ETFs in Focus
Against this backdrop, below we highlight a few energy ETFs that can be up for gains.
Invesco DB Oil Fund (DBO - Free Report) – Down 0.60% Past Month
United States Brent Oil Fund LP (BNO - Free Report) – Down 0.6% Past Month
VanEck Oil Refiners ETF (CRAK - Free Report) – Up 5.7% Past Month
Invesco Dorsey Wright Energy Momentum ETF (PXI - Free Report) – Up 2.8% Past Month
InfraCap MLP ETF (AMZA - Free Report) – Up 1.8% Past Month
iShares U.S. Energy ETF (IYE - Free Report) – Up 1.0% Past Month
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)