After six months of oil prices fluctuating between $43 and $54, what can catalyze a sustainable move higher?
WTI crude oil averaged $52-53 per barrel between December 2016 to February 2017, before tumbling into the upper $40s through most of March as investors grew increasingly concerned about a larger supply glut from higher US crude inventories and production. Currently, crude oil stands above the psychological threshold of $50 per barrel as markets scout for signals of lower supply. While oil prices may temporarily fluctuate based on heightened geopolitical tensions, the fundamental environment may continue to improve for oil prices (and the overall energy sector) as markets rebalance. Jennison Associates’ Global Natural Resources Equity portfolio manager, Jay Saunders, provides the following reasons for higher oil prices near term:
While oil prices have recently been range-bound absent a credible reason to break out substantially in either direction, material evidence of tapered production or sharp inventory drawdowns could serve as long-awaited price triggers for an upward move in oil prices. The resultant environment makes select areas across the energy value chain attractive, as it could spur capital investment in the upstream segment and raise demand for energy infrastructure in the midstream segment. PGIM Investments offers the following funds that may help investors seeking to capitalize on favorable energy fundamentals:
Prudential Jennison MLP Fund
Prudential Jennison Natural Resources Fund
Learn more about Investing in Energy.
The Organization of Petroleum Exporting Countries (OPEC) is a union of oil-producing countries that regulates the amount of oil each country produces. West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark for oil pricing.
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