Top Reasons We Could See a Massive Oil Rally

May 24, 2023
Dollars and a drilling rig for crude oil

Oil prices are about to gush higher.

Last checked, crude oil is up about $1.46 to $74.37 – and could gush higher for two key reasons. For one, Saudi Arabia just said, “short sellers – those betting prices will fall – should ‘watch out’ for pain.” Some investors are taking that as a sign that OPEC+ may be considering further output cuts at its next meeting on June 4. Two, we have to consider summer is around the corner, where we’ll see a pickup in oil demand, as folks travel.

Three, crude oil has become ridiculously oversold at major support. Four, Goldman Sachs is predicting an oil rally, too. “Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” Goldman analysts said, as quoted by Bloomberg.

From a current price of $74.33, oil could gush to $85 again, near-term, which could be great news for many of the major oil stocks, like XOM, OXY, and CVX. But also for related ETFs, such as:

SPDR Energy Select Sector ETF (XLE)

With an expense ratio of 0.12%, 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 than a single one of its holdings.

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

With an expense ratio of 0.35%, the ETF provides exposure to the oil and gas exploration and production segment of the S&P TMI, which comprises the following sub-industries: Integrated Oil & Gas, Oil & Gas Exploration & Production, and Oil & Gas Refining & Marketing, as noted by State Street SPDR. Some of its top holdings include Callon Petroleum, SM Energy Company, Devon Energy Corporation, EOG Resources, and ConocoPhillips, for example.

iShares Global Energy ETF (IXC)

The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector. Some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.