Oil is one of this year’s best-performing commodities, a theme that is benefiting exchange traded products, such as the United States Oil Fund (NYSEArca: USO).
USO, which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, are up 26.29% and 23.94%, respectively, this year.
In January and February, oil notched its best two-month performance since 2016 when prices bounced in April and May following a precipitous plunge that sent prices below $27 per barrel, the Wall Street Journal reports. Robust demand, a critical factor with any commodity, is seen propping up oil prices.
“The world’s appetite for oil and gasoline is growing faster than many forecasters expected, putting Brent crude on pace to top $70 a barrel, Goldman Sachs says,” reports CNBC. “The investment bank says oil demand grew by 1.55 million barrels per day in January alone, a strong result despite a tough comparison with high consumption last year. For the first quarter, Goldman expects global oil demand to grow by nearly 2 million bpd, trouncing its earlier forecast for 1.1 million bpd and driven by consumption in emerging markets.”
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The hard fought rebound this year has also come off a steep decline. Crude prices plunged 44% from a multi-year high in early October through the nadir on Christmas Eve as investors ditched energy in response to rising pessimism over global economic growth and potentially diminished demand across a range of commodities.
Demand Outlook for Oil
“The strong demand will likely push Brent crude, the international benchmark for oil prices, above $70 per barrel. The rally has already outstripped Goldman’s prior view that Brent would peak at $67.50 in the second quarter,” according to CNBC.