WTI crude oil prices fell by 4.55% over the week, despite escalating geopolitical tensions in the Middle East. These events have yet to significantly disrupt oil supply chains, reinforcing projections for increased oil production next year.

OPEC+ Decisions and Market Projections

Despite the looming prospect of OPEC+ refraining from ramping up production, oil prices experienced a significant drop during the last week of November. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have postponed their policy meeting to December 5. Current expectations suggest they will maintain existing production cuts rather than deepen them further. Analysts anticipate that OPEC+ will likely roll over these cuts into the new year, a move that may not suffice to counterbalance an expected production surplus.

Supply Surplus Expectations for 2025

The International Energy Agency (IEA) projects a potential surplus of over 1 million barrels per day next year. With this surplus, the market could see oil prices staying beneath 2024 levels in 2025. The anticipated excess supply represents more than 1% of total global output.

Energy Sector ETFs Experience Losses

Energy-focused ETFs reflected the broader market’s unease. ETFs tracking the energy sector posted an average decline of 3.20%, closely mirroring the 3.45% drop in crude oil ETPs.

The iShares S&P/TSX Capped Energy Index ETF (XEG) dropped by 3.18%, while the BMO Equal Weight Oil & Gas Index ETF (ZEO) was not far behind, losing 2.90%. These declines underscore the sector-wide impact of this week’s developments, as investors reassess risk amid uncertainty.

There is a significant divergence in the year-to-date performances of Energy funds, attributable to several factors. The NRGY ETF was recently established, in November, therefore its year-to-date performance is not representative.

The other two Ninepoint Energy funds, NRGI and NNRG.U, are actively managed; thus, their performance relies on their distinct investment strategies implemented by their Portfolio Managers. The objective of NNRG.U is long-term capital growth; it also experiences the effect of USD/CAD currency fluctuations because it is denominated in US dollars. While the NRGI seeks to provide recurrent income and capital appreciation. The fund can also use a 300% leverage.

These three funds (NRGY, NNRG.U, NRGI) all fall under the Equity Energy Funds category - they invest in companies involved directly or indirectly in the exploration, development, production and distribution of energy resources (such as oil and gas). Conversely, HUC concentrates its investments exclusively on Crude Oil Futures Contracts.

Here’s a comparison between Energy ETFs

Group Data

Index Data

Funds Specific Data: XEG, NNRG.U, ZEO, NRGY, NRGI, HXE, HUC, RENG

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.