Elevated Demand for Oil Could Push Commodities Even Higher

Even with the transition to renewable energy sources, oil can still see record demand amid high inflation. As such, consider getting exposure to commodities that include oil such as the Neuberger Berman Commodity Strategy ETF (NBCM).

“Global oil demand is expected to notch a new record this year – and that could spell trouble for crude prices, which are already facing upwards pressure from supply cuts, the International Energy Agency (IEA) said in a recent report,Markets Insider said, noting also that the IA predicts that global crude oil demand will hit a record 101.9 million barrels per day this year, which is ​2 million barrels per day higher than the previous year.

In terms of which countries will see the most demand, the IEA said that China could account for 50%. That demand spike is a given, especially after the second-largest economy re-opened its doors after a government-mandated lockdown amid rising COVID-19 cases.

Additionally, the forces of supply and demand will play into oil’s favor. More specifically, a cut in supply should apply upward pressure to oil prices through 2023.

“OPEC+ announced a surprise production cut earlier this month of over 1 million barrels a day,” Markets Insider noted. “Russia, which is a member of OPEC+, said it would extend its cut of 500,000 barrels a day cut through mid-2023.”

Exposure to Crude Oil and Other Commodities

Brent and WTI crude are just two of the 28 holdings found in NBCM. As such, it provides diversified exposure for investors looking to gain upside in oil while having balanced exposure to other commodities in what market experts call a “commodities super cycle.”

Additionally, the fund uses active management, which allows for fluidity when adding commodities exposure. With its active management style, NBCM puts the portfolio holdings in the hands of seasoned portfolio managers, allowing for changes to holdings when market conditions warrant necessary adjustments.

This essentially adds a layer of flexibility to an investor’s portfolio, especially given that commodities can be volatile at times. About 14% of the fund is focused on crude as well as gold, which has also been pushing higher as safe haven assets see more demand with a potential recession ahead.

The fund invests in commodity-linked derivatives with an active risk-balanced, diversified approach that seeks to minimize the effects of market volatility — which is privy to the commodities market. Tactical exposure adjustments expand potential alpha sources by considering top-down macro variables among commodity sectors and individual commodity outlooks to take advantage of short- and long-term opportunities.

For more news, information, and analysis, visit the Commodities Channel.