The energy sector is expected to continue its positive run this year. Meanwhile, non-OPEC member Russia also decided to forego 300,000 barrels per day of oil output to prop up oil price. This was followed by output reductions of 139,000 barrels per day for United Arab Emirates, 131,000 barrels per day for Kuwait and 95,000 barrels per day for Venezuela. Moreover, Iraq – which had previously resisted cuts, also agreed to curtail production by 200,000 barrels per day.
Saudi Arabia, the largest oil producer, will bear the brunt the most with a cut of almost 500,000 barrels per day. The 14-member cartel is expected to reduce production by 1.2 million barrels per day. The OPEC, which accounts for one-third of the global output, pledged to cap its oil production for the first time in eight years. Oil prices logged in the biggest annual gains since the financial crisis with Brent and WTI rising 52% and 45%, respectively, primarily driven by the historic output cut deal that could end the two-year crude-oil rout and stabilize the oil market. However, none of the above predictions came out to be correct as oil prices made a significant recovery thereafter. While some suggested prices might drop as low as $20 a barrel, gloomier estimates called for a sensational $10-per-barrel floor. The dramatic slide prompted several analysts to make bold calls on a potential bottom. No sign of output control, boom in shale oil production and slowdown in major economies throughout the globe had negative impact on oil prices in the first half of 2016. A brief look at the top performers in the category last year may be ideal in the current scenario.Įnergy sector went through a roller coaster ride last year to hit a 12-year low level in February and recovering from the same to hover above $50-per barrel mark.
Despite the weak start, massive recovery witnessed in the second half of last year following OPEC’s decision to cut output and stabilizing global economy gave a significant boost to energy mutual funds last year. According to Morningstar, energy sector emerged as one of the best performers among the broad mutual fund categories in 2016.
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