Energy ETFs Rally as OPEC Supports Firm Floor on Crude Oil Prices
This article was originally published on ETFTrends.com.
Energy-related exchange traded funds were leading the charge on Friday after the Organization of Petroleum Exporting Countries and its allies committed to deep crude oil output cuts in an attempt to stymie a global supply glut and bolster pricing.
Among the best performing non-leveraged ETFs of Friday, the SPDR Oil & Gas Equipment & Services ETF (XES) advanced 4.8%, VanEck Vectors Oil Service ETF (OIH) jumped 4.0% and iShares U.S. Oil Equipment & Services ETF (IEZ) increased 3.3%. Meanwhile, the broader Energy Select Sector SPDR (XLE) , the largest equity-based energy exchange traded fund, gained 2.0%.
The United States Oil Fund (USO) , which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (BNO) , which tracks Brent crude oil futures, were also 1.5% and 1.7% higher, respectively, on Friday while WTI crude oil futures were up 1.3% to $59.2 per barrel and Brent crude rose 1.6% to $64.4 per barrel.
OPEC along with its allies including Russia agreed to aggressively cut an additional 500,000 barrels per day in for the first quarter of 2020, bringing the total to 1.7 million bpd, or 1.7% of global demand, Reuters reports.
Saudi Energy Minister Prince Abdulaziz bin Salman also added that effective cuts could be as much as 2.1 million bpd as the Kingdom would likely reduce output by more than its quota.
“The Saudi goal was not necessarily to push oil prices significantly higher, but rather - fresh on the heels of the Aramco IPO - to put a firm floor under them during the first quarter to temper any seasonal weakness,” Amrita Sen, co-founder of Energy Aspects, told Reuters.
OPEC and allied producers, or OPEC+, produce over 40% of the world’s total oil output. Under the new deal, OPEC will take on 372,000 bpd in new reductions and non-OPEC producers will enact an extra cut of 131,000 bpd.
“Best outcome you could have expected. Puts floor under prices at $60 Brent but (we’re) still likely in $60-65 Brent market until the global economy improves and then we could see $65 to $70 Brent in Q2,” Gary Ross, founder of Black Gold Investors, told Reuters.
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