4 Leveraged ETFs To Tap The Soaring Energy Sector

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Energy has been outperforming this year buoyed by the expectation of swift global economic recovery that has ramped up the demand for energy. Rapid vaccination rollout, more vaccine progress, and a new $1.9 trillion stimulus bode well for the economy. The latest upbeat economic data from the United States and China also bolstered confidence in economic recovery.

Along with a brightening demand outlook, tightening supply conditions are also giving a boost to the oil price. This is especially true as the Organization of the Petroleum Exporting Countries (OPEC), Russia, and the oil-producing allies last week agreed to extend their production cuts into April.

Additionally, a latest attack on a key Saudi Arabian refining facility — Ras Tanura on the Persian Gulf — has led to disruption in oil supply in the Kingdom's oldest and largest refinery and a key hub for its market-leading exports. The terminal is capable of exporting roughly 6.5 million barrels a day — nearly 7% of oil demand. The attack follows a recent escalation of hostilities in the Middle East region after Yemen’s Houthi rebels launched a series of attacks on Saudi Arabia. Additionally, a severe cold snap in Texas and the other parts of southern United States last month knocked out production of roughly 4 million barrels per day.

Notably, oil price has gained more than 30% so far this year. Brent topped $71 per barrel for the first time since January 2020 while U.S. crude hit the highest in more than two years.

Added to the positive sentiment is the state of backwardation in the oil futures market, where later-dated contracts are cheaper than the near-term contracts. Per CME Group data, Brent futures for June delivery were trading about 54 cents below May contracts at the time of writing. This signals that the oil market is tightening and demand is robust, paving the way for an oil rally. This trend is likely to persist at least in the near term, acting as the biggest catalyst for the commodity.

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Craig Richards 4 weeks ago Member's comment

How about $FAS?