With crude oil prices breaking above $70 per barrel for the first time since 2014, energy ETFs were leading the market rebound Monday.
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, rose 1.2% on Monday while the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, gained 1.4%. WTI crude oil futures were 1.2% higher to $70.5 per barrel and Brent crude was up 1.5% to $76.0 per barrel.
Meanwhile, the Energy Select Sector SPDR (NYSEArca: XLE), the largest U.S.-listed energy sector ETF by assets, jumped 1.7% Monday.
Crude oil prices have increased more than 10% over the past month after President Donald Trump signaled it is likely the U.S. will withdraw from a 2015 international agreement with Iran that eased sanctions in return for curbs to the country’s nuclear program, the Wall Street Journal reports.
Traders were concerned that with the deal off the table, Iranian exports could quickly halt, cutting down global supply.
“It’s going to be one of the great dates in crude oil here,” Bob Yawger, director of the futures division at Mizuho Securities U.S.A., told the WSJ. ”The market’s already loaded up.”
The Drag on Oil Prices
A combination of diminished global output and rising global demand have helped reduce the global supply glut that dragged on oil prices for years. Production cuts from the Organization of Petroleum Exporting Countries and their allies have largely contributed to the cut in supply. Meanwhile, expanding economies around the world has bolstered demand for raw materials such as crude oil.
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According to OPEC figures, the surplus of oil compared with the five-year average now sits at 55 million barrels, compared to 340 million barrels at the start of 2017, contributing to the 60% surge in oil prices since last summer.
“There’s a feeling that the global market is very tight right now and we can’t afford to have many disruptions,” Phil Flynn, senior energy analyst at Price Futures Group, told the WSJ.
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