The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, is higher by nearly 8% over the past month, but that does not mean crude’s recent rally is running on fumes.
In fact, some oil market observers believe the commodity can continue rallying, perhaps to $70 per barrel, implying significant upside from Tuesday’s close at $49.33 per barrel. Looking ahead, the Organization of Petroleum Exporting Countries will consider agreeing on output cuts for most members when the group’s energy ministers meet on November 30.
SEE MORE: Energy ETFs Rally as Russia Joins OPEC in Considering Supply Limits
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day. While Saudi Arabia, OPEC’s biggest producer, has agreed to reduce output, Iran, Libya and Nigeria might not follow suit.
“Master technical analyst Louise Yamada says two charts show that crude, still largely trapped in a long-term bear market for more than a year, is targeting new levels around $70,” reports CNBC.
[related_stories]Elevated levels of production remain an issue for oil as well. OPEC has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers. The International Energy Agency expects it will take several years before OPEC can effectively price out high-cost producers. Russia has also signaled it might trim output as much as some traders have hoped for.
ETF investors interested in gaining exposure to the improving energy sector have a number of broad plays to choose from. For example, the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, is the best-performing member of the sector SPDR group this year.
SEE MORE: Energy Stocks, ETFs can Keep Surging
“Following the February lows, where crude hit $26 per barrel, the commodity has risen 96 percent—thanks in large part to OPEC’s willingness to cut production levels by nearly 700,000 barrels per day. On Sunday, Saudi Arabia stated the cartel was looking for new ways to cooperate with non-OPEC members to stabilize markets,” according to CNBC.
For more information on the oil market, visit our oil category.
United States Oil Fund (NYSEArca: USO)
