This article was originally published on ETFTrends.com.
Energy stocks and sector-related exchange traded funds were among the lone areas of strength in U.S. markets Friday after the Organization of Petroleum Exporting Countries, along with oil-producing allies such as Russia, agreed to cut production to reduce the expanding global supply glut.
Among the better performing areas of the market on Friday, the Energy Select Sector SPDR (XLE) rose 0.2%, Vanguard Energy ETF (VDE) increased 0.5%, iShares U.S. Energy ETF (IYE) advanced 0.3% and Fidelity MSCI Energy Index ETF (FENY) gained 0.2%.
OPEC and its allies will reduce crude oil output by 1.2 million barrels per day, the Wall Street Journal reports.
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Meanwhile, WTI crude oil futures were 2.9% higher to $53.0 per barrel and Brent crude gained 3.5% to $62.2 per barrel.
Saudi Arabia, the de facto leader of the oil cartel, has been facing demands from President Donald Trump to prop up the global economy by maintaining current outputs to keep supply high and oil prices low. Furthermore, the output reduction would provide support to Iran by raising the price of oil amid Washington D.C.'s bid to squeeze the economy of OPEC’s third-largest producer under its new sanctions.
“U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market,” Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher, told Reuters.
The markets reacted positively to the production cuts after earlier talks dragged on when Saudi Arabia and Russia disagreed over who would shoulder the production cuts to stem the 30% decline in oil prices. Many did not price in any production cuts, which began at the start of the year.
“There was a huge glut of oil in November, thanks to the ramp up in production by Russia, the U.S. and Saudi Arabia ahead of the Iran debacle,” Matt Badiali, a senior research analyst at Banyan Hill Research specializing in oil and commodities, told MarketWatch.
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