As the economy rebounds and begins to pick up momentum, the Organization of Petroleum Exporting Countries and the International Energy Agency anticipate a recovery in global oil demand, potentially fueling energy sector-related exchange traded funds.
The IEA said that a recovery in oil demand could outpace production in the second half of the year, potentially triggering “a rapid stock draw” in the global oil glut that has accrued since the pandemic started, the Wall Street Journal reports.
The agency also upwardly revised its forecast for producing nations outside of OPEC and ally countries like Russia, or OPEC+, raising projections for non-OPEC supply growth by 290,000 barrels per day to 830,000 barrels per day this year.
Meanwhile, OPEC has hiked its non-OPEC production growth forecast by 200,000 barrels to 700,000 barrels a day.
On the other hand, the IEA reduced its projections for global oil demand by 200,000 barrels a day to 96.4 million barrels, around 3% less than in 2019, but it partially attributed the lower outlook to a change to historic data. OPEC also reduced its own 2021 demand forecast, reducing it to 96.1 million barrels per day.
Nevertheless, the IEA noted that strict supply discipline from OPEC+ members has quickened the drawdowns in global inventories, which has contributed to stabilizing prices.
“The prospect of tighter markets ahead” has been responsible for a rally in oil prices in recent weeks, the agency said.
Looking ahead, OPEC believed that countries outside of the Organization for Economic Cooperation and Development, like China and India, enjoyed a rebound in oil demand last year and will again make up over half of the recovery in global oil consumption for 2021.
ETF investors interested in gaining exposure to the rebound in the oil markets could consider energy sector-related ETF strategies such as the Energy Select Sector SPDR (NYSEArca: XLE), iShares U.S. Energy ETF (NYSEArca: IYE) and Vanguard Energy ETF (VDE).
For more news, information, and strategy, visit the Equity ETF Channel.