After falling to multi-year low levels, oil prices have bounced back sharply in the last three months. The initial rally was sparked by expectations that a meeting between major oil producers would lead a production freeze. However, that meeting ended without any deal. Despite the negative development, oil continued to rally.
Prices were mainly driven higher by supply outages in Kuwait, Canada, Libya and Nigeria. While these supply side issues have boosted price in the near-term, analysts are also turning bullish on oil in the medium-term. This is because the fundamentals of the oil market are improving. While the market still remains oversupplied, demand has been robust. At the same, non-OPEC production has been dropping. As a result the oil market could rebalance sooner-than-expected.
It is not surprising to see then that the Horizon BetaPro S&P/TSX Cap Energy Bull Plus (ETF) (TSX: HEU) has risen sharply in the last three months. The fund made a poor start to the year. But in the last three months it has returned more than 48%, easily outperforming the broader market. And given the bullish outlook for oil prices, the upward trend could continue.
