4 Best Energy Mutual Funds To Buy In 2019

Oil prices are expected to continue with their gains as markets shed fears of an economic slowdown worldwide. Several encouraging factors such as the Organization of the Petroleum Exporting Countries’ (OPEC) production cuts and favorable U.S.-China trade talks helped oil gain, but the former was the fundamental driver.

Therefore, it would be ideal to invest in energy mutual funds that could offer good returns this year.

Oil is Back in Bull Market

Oil entered bull market last week after gaining 20% from the low point in December. Brent crude oil rose above $61 a barrel and West Texas Intermediate (WTI) moved above $52.

Oil prices rose for the week ended Jan 11, with Brent Crude oil for March delivery rising 6% and WTI for February delivery increasing 7.6%.

Catalysts Behind Oil Price Jump

OPEC and its allies’ decision to cut oil output by 1.2 million barrels per day (bpd) in December is pushing oil prices up. The move was primarily to stop the oil market from sinking and sustain economies that are dependent on oil exports.

According to economic research firm TS Lombard, “Oil prices are likely to stabilize around current levels and quite possibly drift upwards.” The firm referred to OPEC and its allies’ oil production cuts as a major driver in boosting oil prices.

The last quarter of 2018 was marked by turbulence in global oil markets, largely driven by concerns over oversupply and declining demand. Oil prices slumped from October’s high of more than $86 per barrel to a little above $50 in recent times. Oil finally recovered in January after OPEC’s implementation of production cuts.

In addition, positive developments in U.S.-China trade discussions could boost oil prices as well, since it would help raise China’s oil demand.

Another factor that could play a role in raising oil prices is International Maritime Organization’s (IMO) regulations that are set to take effect from 2020. The regulation will cease the usage of light oil as marine fuel and prompt the usage of heavy distillates in a bid to reduce pollution. U.S. shale oil being light may not be able to boost oil prices once IMO’s regulation kicks in. In such a scenario, OPEC’s supply cuts will have more driving effect on global oil prices.

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