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ETF Specialist

An Oil-Services ETF Ready for Rising Prices

Look to domestic service providers in a rising oil-price environment.

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12Fueled by geopolitical uncertainty and tightening global supplies, oil prices have risen and production has increased in North America. Unconventional sources of production in the United States have led to a reduction in import levels not seen in a decade, but tensions in historical hot spots continue to keep current oil production only slightly above consumption.

Geopolitical tensions have failed to abate, as the U.S. recently placed a second aircraft carrier in the Persian Gulf. The potential closure of the Strait of Hormuz has fueled fears of a globally impactful supply shock. At the same time, spare capacity among big-name oil-producing nations has become exceedingly tight. We estimate that with only 2 million barrels per day of excess capacity, versus global oil demand of 75 million barrels a day, prices may remain elevated for quite some time. This creates the potential for an outsized runup in the event of a production shortfall.

Abraham S.H. Bailin does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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