Key Drivers for the Energy Sector
Rather obviously, Oil price is the key driving forces behind the success of this sector, with the price of the commodity having a huge impact on the price of this ETF’s components. However there are other influences, such as exploration and production spending by each individual company. World events and macroeconomic conditions have a bearing on the performance of this fund, with natural disasters or terrorist attacks having a negative impact on performance.
Energy conservation and the success of exploration projects will drive individual companies prices up, while on the other hand liabilities for environmental damage, for example the BP DeepWater Horizon Spill in 2010, will have a negative effect on performance. Governmental regulatory policies also affect this sector and a change in policy will have an impact depending on the nature of the legislation, either positive or negative. This type of sector relies heavily on supply and demand factors associated with oil and natural gas and as such these should be considered before making a direct investment.