Investors and traders alike will want to check out the high-flying Invesco DWA Energy Momentum ETF (PXI), which is up 56% year-to-date.
Higher oil prices are providing the necessary tailwinds for an energy rally and there’s no stopping the party yet. The U.S. Energy Information Administration just upped the ante on its forecast for oil prices this year.
“The U.S. Energy Information Administration raised 2021 forecasts for U.S. and global benchmark oil prices in a monthly report Tuesday, pointing out that the recent decision by major oil producers to extend existing supply cuts through April have provided support for prices in the near term,” a MarketWatch report noted.
“The EIA boosted its 2021 West Texas Intermediate crude price forecast to $57.24 a barrel, up 14% from the January forecast,” the report added further. “It expects 2022 prices to average $54.75, up 6.2% from the previous forecast. For Brent crude, it also lifted this year’s forecast by 14% to $60.67 and next year’s by 6% to $58.51.”
PXI seeks to track the investment results of the Dorsey Wright® Energy Technical Leaders Index. The underlying index is composed of at least 30 securities of companies in the energy sector that have powerful relative strength or ‘momentum’ characteristics.
The ETF is part of the suite of Intellidex products from PowerShares, which means that the fund is linked to an index designed to outperform traditional cap-weighted benchmarks. Those who believe this methodology has the potential to generate excess returns may find PXI to be the ideal way to access the U.S. energy market in companies that are exhibiting strong momentum.
The fund is producing the types of gains that are typically only seen with leverage-fueled products. Within the past 12 months, the fund has risen over 100%.
Vaccine and OPEC Tailwinds
The vaccine rally and OPEC’s decision to cut output are spurring the rise in oil prices.
“Oil prices began rising last November when the first news about vaccine safety and efficacy emerged,” an OilPrice.com article explained. “Then, oil prices experienced a series of small dips. After that, it’s been mostly smooth sailing since January, thanks to the mass rollout of vaccinations that are expected to boost oil demand soon.”
“In addition to the vaccinations, however, OPEC+ continued to keep a cap on its production, with Saudi Arabia taking on a unilateral cut of 1 million bpd in addition to its OPEC+ quota,” the article added. “The cuts have been effective, as production cuts tend to be, reducing global stocks of crude oil.”
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