With crude oil prices stabilizing, investors may start looking back into energy ETFs to capitalize on the steady global expansion.
“We see the recent strength in oil prices moderating over the near term. Within energy-related assets, we prefer to invest in selected equities versus oil directly and maintain our neutral stance on high yield energy debt,” BlackRock strategists said in a recent research note.
The global market has suffered through a supply glut, but the Organization of Petroleum Exporting Countries and its allies have taken steps to rein in the oversupply. Later this month, the cartel will meet and is widely expected to extend oil production cuts, potentially through the end of 2018. Oil prices have already strengthened in anticipation of the extended cuts.
“We could see limited upward price movement if OPEC proceeds as expected and downside risk to oil prices if no extension is announced,” according to BlackRock.
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Weighing on the future outlook, non-OPEC countries could raise production output next year. For instance, in the U.S., shale producers may signal an intent to ramp up production, and the clean up efforts in wake of the hurricane season could also boost U.S. oil exports and increase global supply.