Energy continues to be a strong performer in spite of market volatility due to inflation fears. Take, for example, the Direxion Daily Energy Bull 2X Shares (ERX) — the fund is up close to 60% this year.

This performance comes in spite of the changing of the guard when it comes to the energy sector. There’s a shift towards using more renewable energy sources, but that hasn’t affected the energy sector yet.

Rising oil and gas prices are helping to fuel strength. Geopolitical forces are feeding into higher oil prices, especially with regard to the contentious struggle at the Ukrainian border involving one of OPEC’s member countries, Russia.

“The prospect of military action by one of the world’s largest oil exporters raised the chances of further supply disruption as producers are already falling behind rising demand and petroleum inventories around the world are dwindling,” a Wall Street Journal report says.

“Even without war, oil supply issues among exporting nations threaten to increase tightness and volatility in energy markets and push prices higher, the International Energy Agency said Friday,” the report adds further.

Energy traders, especially the bullish ones, will certainly stand to benefit from the ongoing crisis at the Ukrainian border. They could use ERX to amplify their gains based on bullish notions that the energy sector will continue to experience strength.

ERX seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector, which includes the following industries: oil, gas, and consumable fuels, and energy equipment and services.

ERX Chart

Play Oil Prices

Given the discussion on oil, traders who want to hone in on bullish oil can play the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH). The fund is up over 100% and could continue rising this year if supply-demand factors remain in oil’s favor.

“U.S. oil production plummeted in the second half of 2020. Production began to recover in late 2020, but the recovery was slow,” a Forbes report says. “Thus, 2020 production was lower than 2019 production, and 2021 production was lower than 2020 production.”

“But, even though 2021 marked a second straight annual decline, by the end of 2021 it was clear that a recovery was underway,” the report adds. “Late 2021 production reached 11.7 million barrels per day (BPD), which was still a million BPD below 2019 levels, but a million BPD better than late 2020 levels.”

GUSH Chart

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