Get set for higher oil prices.
According to JP Morgan, oil will hit $125 a barrel in 2022, and up to $150 by 2023.
“OPEC+ is not immune to the impacts of underinvestment…. We estimate ‘true’ OPEC spare capacity in 2022 will be about 2 million barrels per day (43%) below consensus estimates of 4.8 million,” said the JP Morgan analysts led by Christyan Malek, as quoted by TheStreet.com.
In addition, the analysts noted that producers “have failed to put up the amount of capital required to ramp up production enough to meet demand. The Wall Street bank estimates there is a $750 billion gap in terms of global oil capital spending, requiring oil to rise to $80 to incentivize further investment,” as reported by CNN.
Not helping, new COVID variant news is raising fears of a global travel ban, and the potential for weaker oil demand. Plus, all eyes on are OPEC+, which postponed its meetings over oil prices to assess the impact of the virus. Some analysts also expect for OPEC+ to pause its planned monthly increases of 400,000 barrels per day in 2022 to balance the market.
All could send oil and gas pump prices significantly higher.
SPDR Energy Select Sector ETF (XLE)
When we first highlighted the XLE, it traded at $52.70. It’s now up to $54, and could be headed to $60, near-term.
The XLE ETF provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries, as noted by State Street SPDR. Not only does an ETF allow for diversification, you can buy it for less.
Invesco DB Oil Fund (DBO)
DBO traded at $13.85 when we first mentioned it. It’s now at $12, and could push higher with oil prices. This ETF seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the Fund’s holdings of primarily US Treasury securities and money market income less the Fund’s expenses. It trades WTI crude futures.
iShares Global Energy ETF (IXC)
IXC was at $27. It’s now back to breakeven, and could push higher. The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector. Trading at $27, some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.