Crude ETFs climb as oil futures near multi-year highs
Crude oil and ETF futures on Friday hit multi-year highs, targeting a third straight week of gains, as projections for global demand continue to rise amid rising vaccination rates and relaxation of pandemic restrictions.
International benchmark Brent crude futures rose 35 cents to $ 72.87 a barrel this morning, a day after closing at their highest level since May 2019. Meanwhile, the US benchmark , West Texas Intermediate (WTI) crude futures rose 80 cents to top $ 71 per barrel, per day after their highest close since October 2018, for a 1.12% gain on the day .
“Demand is coming back faster than supply and we will need more supply to meet that demand,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
The International Energy Agency (IEA) noted in its monthly report that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC +, should increase production to meet demand, which is expected to increase. return to pre-pandemic levels by the end of the next year.
“OPEC + must turn on the taps to ensure an adequate supply of global oil markets,” said the Paris-based energy watchdog.
Yet growing demand and countries’ short-term policies may work against the IEA’s demand to end new funding for oil, gas and coal.
“In 2022, the 24-member OPEC + group, led by Saudi Arabia and Russia, has the potential to increase crude supply by 1.4 million barrels per day (bpd) above of its target from July 2021 to March 2022, “the IEA said.
Analysts are also in favor of rising oil prices, with Goldman Sachs predicting Brent crude prices to hit $ 80 a barrel this summer, as vaccine rollout spurs global economic activity.
Data showing road traffic returning to pre-pandemic levels in North America and much of Europe was encouraging, analysts at ANZ Research said in a note.
“Even the jet fuel market is showing signs of improvement, with flights in Europe increasing 17% in the past two weeks, according to Eurocontrol,” ANZ analysts said.
This is good news for crude oil ETFs like the United States Petroleum Fund (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO), who are also in the green Friday.
The cyclical pattern of rising demand for crude oil in the summer is common, as the EIA explained in its most recent report: “In the warmer months, the demand for distillate generally decreases due to less heat demand, while the demand for gasoline usually increases due to more driving. in summer. According to our Weekly State of Oil Report Based on this data, distillate imports in the East Coast region averaged 208,000 b / d from April 2 to June 4, and gasoline imports averaged 816,000 b / d.
Oil has rallied from the pandemic lows of April 2020, but appears to have crossed a multi-month trading range based on technical analysis, with West Texas Intermediate futures topping the $ 70 mark to close at their highest level since October 2018 after briefly touching the key psychological level earlier this week.
“The price of crude oil shows a larger rise to start testing the barrier at 71.00, reinforcing expectations for the continuation of the uptrend, that its next target is at 72.20, while hitting it, it should remain above 69.90 “, according to energy analysts at economies.com.
“We’re looking for a pretty big drop in crude oil inventories in the United States as the demand thesis continues to improve,” said John Kilduff, partner at Again Capital LLC. “This atmosphere remains bullish, as we move towards a structural deficit in terms of supply relative to demand.”
For investors looking for rough ETFs to play with the rise of oil, which has been fairly stable since November, the US 12-month oil fund (USL) and the IPath ETN Pure Beta Crude Oil (PETROLEUM) are two funds to consider.
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