VDE - TD Wealth says oil prices may stay higher for longer

2023-07-27 08:54:00 ET

TD Wealth argued that the recent rally in oil ( CL1:COM ) prices may have more staying power than many think, thanks in part to macro and geopolitical sentiments and the basic fundamentals of oil's position.

"So the fundamentals of supply demand are quite constructive. If we look at where inventories are sitting globally, whether it's oil on water, or the data that's released by the DOE, or data that you get out of Europe on a relatively high frequency basis, inventories for crude and product are drawing," Hussein Allidina, Head of Commodities at TD Asset Management, stated .

"Part of that is because of stout demand. Part of that is because you're now starting to see, finally, a reduction in volumes from Russia and Saudi," Allidina added.

Currently, oil finds itself up 1.3% on Thursday morning, as it trades near $79.55 per barrel and looks poised to break above $80 per barrel for the first time since April 19th. Moreover, oil now trades higher by 25% since its 2023 low of $63.64 per barrel, which was observed back on May 4th.

Crude is not only testing $80 per barrel but has also marched above its 100- and 200-day moving averages, a feat not seen since July 5, 2022.

Allidina went on to say that he does not think that OPEC is going to bring back production quickly. He also added that in a recent report, OPEC highlighted the lack of investment that's flowing towards the energy space, and Allidina says that they are hedging to stabilize any sort of downside demand so they don't end up in 10 to 15 years with a 15 million per day supply and demand deficit.

"So I think they're very interested in stabilizing price at a sort of elevated level - $70, $80 $90 a barrel. I don't think they're going to rush to bring supply back."

For investors that want to further analyze the energy market, listed below are a handful of oil and gas focused exchange traded funds worth noting:

• United States Oil Fund LP ( NYSEARCA: USO )
• ProShares Ultra Bloomberg Crude Oil ( NYSEARCA: UCO )
• Invesco DB Oil Fund ( DBO )
• United States 12 Month Oil Fund LP ( USL )
• Energy Select Sector SPDR Fund ( NYSEARCA: XLE )
• Vanguard Energy ETF ( NYSEARCA: VDE )
• SPDR S&P Oil & Gas Exploration & Production ETF ( XOP )
• VanEck Oil Services ETF ( OIH )

More on Energy:

• Energy producers top S&P sector leaderboard as crude oil continue to climb
• Oil Can Still Hit $100 Per Barrel And XLE Investors Can Benefit
• Crude inventory decreased by 0.6M barrels for week ended July 21 - EIA

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