Energy-related exchange traded funds climbed on Monday, with Brent crude oil futures breaking back above $100, as Western countries piled more sanctions on Russia, fueling fears of disruptions to a global oil supplier.
On Monday, the Invesco Dynamic Energy Exploration & Production Portfolio (NYSEArca: PXE) gained 2.5% and the Invesco S&P SmallCap Energy ETF (NasdaqGM: PSCE) rose 3.3%. The widely observed Energy Select Sector SPDR Fund (NYSEArca: XLE) increased 0.9%.
Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, were also up 2.7%% and 3.3%, respectively, on Monday. WTI crude oil futures were up 5.0% to $96.2 per barrel, and Brent crude gained 3.1% to $100.9 per barrel.
“Growing concerns about disruptions to Russian energy supplies are pushing oil and gas prices up sharply,” Commerzbank analyst Carsten Fritsch told Reuters.
Russia is looking at disruption to all of its commodity exports from oil to grains after Western countries executed even more severe sanctions on Moscow and cut off some Russian banks from the SWIFT international payment system, further isolating the belligerent country from the global economy.
“Russia could retaliate to these harsh measures by reducing or even completely suspending energy shipments to Europe,” Fritsch added.
Russian crude oil makes up about 10% of global oil supply.
“We expect the price of consumed commodities that Russia is a key producer of to rally from here – this includes oil,” Goldman Sachs said, raising its one-month Brent price forecast to $115 per barrel from $95 previously.
However, ceasefire or peace talks could immediately upend the oil trade. Talks between Ukraine and Russia have begun at the Belarusian border, according to a Ukrainian presidential advisor.
“If there’s any progress made in this meeting, we’re going to see a sharp reversal in markets – we’ll see stocks rise, the dollar rise and oil fall,” OANDA analyst Jeffrey Halley told Reuters.
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