Energy companies, including Exxon Mobil (XOM), Chevron (CVX), Occidental Petroleum (OXY), and ConocoPhillips (COP) were up in trading on Monday after the attack of Hamas militants on Israel. This conflict has raised fears of rising friction in the Middle East.
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Following the news of the Hamas attack on Israel, the Organization of the Petroleum Exporting Countries (OPEC) upped its long and medium-term forecast for global oil demand. OPEC expects global demand over the long term to reach 116 million barrels per day (bpd) by 2045, around 6 million more barrels per day than OPEC’s prediction in last year’s report. For reference, demand in 2022 was 99.6 million.
OPEC also indicated that this demand may rise further, fuelled by higher demand from India, China, Africa, and the Middle East. Regarding the medium-term forecast, OPEC estimates global oil demand to jump by 10.6 million bpd compared to 2022 levels to 110.2 million bpd in 2028.
This is in stark contrast to the IEA’s energy forecast, which states that the demand for fossil fuels could peak by the end of this decade.
According to a Reuters report, Saudi officials told the U.S. government that they “were willing to raise output next year as part of the proposed Israel deal.” Riyadh and Moscow have decided to collectively slash their production by 1.3 million barrels per day until the end of this year.
The report quoted Citi analysts as saying, “Timing is everything, and the attacks almost certainly postpone any Saudi-Israeli rapprochement, along with any high probability expectation of Saudi Arabia reducing or eliminating its extra 1 million bpd cut if prices resume their recent fall.”
Is XLE a Good Buy Right Now?
For investors interested in getting exposure to the energy sector, the Energy Select Sector SPDR Fund (XLE) seems to be a good option. Analysts are cautiously optimistic about XLE ETF with a Moderate Buy consensus rating based on 22 Buys and three Holds.
