Oil prices keep advancing for seven straight weeks, and it's becoming increasingly clear that this current rally is no fluke. According to the International Energy Agency’s monthly petroleum status report published on Friday, August 11, oil demand hit a record high in June and is likely to remain strong for the rest of the year.

Global oil demand is hitting record highs due to heavy summer air travel, increased use of oil for power generation and increased petrochemical activity in China, the mentioned report said. Global oil demand is expected to increase by 2.2 million bpd to 102.2 million bpd in 2023, with China contributing more than 70% of the growth, despite currently prevalent negative outlook, instigated by many mainstream media. Having said that, growth is expected to slow to 1 million bpd in 2024 as a post-pandemic recovery is weak, weaker economic conditions, stricter efficiency standards and adoption of new electric vehicles suffer.

What is the best instrument to obtain exposure to the expected oil rise? BlackRock Energy & Resources Trust (BGR ), a closed-end fund, has outperformed its purely passively managed peer Energy Select Sector SPDR (XLE) relatively, as the latter’s annual performance was roughly flat. The former invests at least 80% of its total assets in equity securities of energy and natural resources companies and equity derivatives with exposure to the energy and natural resources industry.

The steep discount offers investors an attractive alternative to a conventional portfolio of the oil majors. BGR employs a covered call strategy to lower volatility, but energy is a cyclical industry and will certainly cause volatility in the fund some time in the future. BGR offers exposure to large energy companies and is currently trading at a discount, making it an attractive investment opportunity. Its distribution yield is 5.94% CAGR, while the expense ratio is more than affordable at 1.26%.