This article was originally published on ETFTrends.com.
Energy stocks and sector-related exchange traded funds led the charge on Tuesday as crude oil prices touched a four-month high on coronavirus vaccine hopes and a European Union stimulus deal.
Among the best-performing non-leveraged ETFs of Tuesday, the VanEck Vectors Oil Services ETF (NYSEArca: OIH) rose 7.9% and SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) increased 7.8% while the broader Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, was 5.9% higher.
Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, was up 2.1% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, gained 2.4% as WTI crude oil futures rose to $42.0 per barrel and Brent crude advanced to $44.2 per barrel.
Energy markets found support from an agreement among European Union leaders on a 750 billion euro, or $859 billion, a fund to counter the coronavirus-induced economic weakness, lifting bets on fuel demand, Reuters reports.
“The stimulus that we got out of Europe really seems to have set the stage for the energy rally,” Phil Flynn, senior analyst at Price Futures Group, told Reuters. “The expectation is if they can get this through all the individual governments and the approval process there is going to be a surge of oil demand.”
The energy sector has also been propped up by promising Covid-19 trials that could lead to an eventual vaccine. The sector has been among the worst hit as the coronavirus ravaged the global economy and weighed on the demand outlook.
“We’re not out of the woods from a recovery standpoint with COVID’s resurgence impacting demand, U.S. operators returning production capacity to the market in the third quarter and OPEC+ bringing some volumes back in July, but with the second quarter in the rearview mirror and E&Ps expected to generate substantial free cash flow, the second half should prove a good set-up for E&P to get back some of the recent weakness,” Simmons Energy’s Mark Lear said in a note, Barron's reports.
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