With crude oil prices projected to go higher, investors should take a look at energy market-related exchange traded funds.
Benchmark U.S. crude oil futures have jumped 16% to start the year, with West Texas Intermediate crude oil futures at around $87 per barrel. Brent crude futures were a little below $90 per barrel. Meanwhile, S&P 500 energy sector stocks are up 18% for the year.
Looking ahead, analysts anticipate oil demand to bounce back to pre-pandemic levels in 2022 and project that prices will likely rise higher, which could further support U.S. producers and discourage consumption that has been unbowed by the highest gasoline prices in years, the Wall Street Journal reports.
“The oil market is heading for simultaneously low inventories, low spare capacity and still low investment,” Morgan Stanley analysts wrote in a research note, lifting their price expectations for the summer quarter by $10 a barrel to $100 for Brent and $97.50 for West Texas Intermediate.
Goldman Sachs upgraded its estimate for the period by $20 per barrel to $100 for Brent and slightly less for WTI crude.
In an even more optimistic forecast, Bank of America also predicted that WTI crude will surge to $117 by July and that Brent could jump to $120.
The bets on $100 crude oil prices rely on consumption that is increasingly unconstrained by COVID-19, which has cut down stockpiles among industrialized nations and fueled doubts that the Organization of the Petroleum Exporting Countries could raise production quickly enough.
Investors who are interested in tracking the crude oil markets can turn to ETFs like the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures.
Additionally, for energy sector exposure, investors can turn to the Energy Select Sector SPDR (NYSEArca: XLE), the Vanguard Energy ETF (NYSEArca: VDE), the iShares U.S. Energy ETF (NYSEArca: IYE), and the Fidelity MSCI Energy Index ETF (NYSEArca: FENY).
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