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Oil in Backwardation: 7 ETFs That Topped the Chart Last Week

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Crude oil prices increased to a more than seven-year high on Jan 28 and reported six straight weeks of gains as the geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply crunch. On a weekly basis, the benchmark contracts posted their longest run of gains since October. Brent futures topped the $90-level, marking the highest level since October 2014.

Tight oil supplies led the six-month market structure for Brent into steep backwardation of $6.92 a barrel, marking the widest since 2013. Backwardation exists when contracts for near-term delivery of oil are priced higher than those for later months, leading traders to release oil from storage to sell it quickly.

Key producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, is falling short of the growth in demand. U.S. output has struggled its way higher even as the rig count has been rising, per energy markets analyst at IHS Markit Steeves, as quoted on CNBC. On the demand side, crude imports in China – the world's biggest importer of the commodity – may bounce back as much as 7% this year, per analysts.

The oil market also responded to attacks on the United Arab Emirates by Yemen's Houthi group. On Jan 17, 2022, Yemen’s Iran-aligned Houthi group attacked the United Arab Emirates. The United Arab Emirates has vowed to retaliate against Houthi militants for the attack that set off explosions in fuel trucks, killing three people, injuring six and causing a fire near the airport in Abu Dhabi.

Oil prices have been rising since the beginning of 2022. The general upside in crude oil prices was triggered by a variety of factors like easing Omicron variant concerns, protests in Kazakhstan and outages in Libya, causing supply shortages and less OPEC+ output.

There was a 70,000 barrel per day increase in OPEC in December from the prior month against the 253,000 bpd rise sanctioned under the OPEC+ supply agreement (according to a Reuters article). A Russian incursion into Ukraine has also been adding to the woes.

Against this backdrop, below we highlight a few energy ETFs that topped the ETFs’ performance chart last week.

ETFs in Focus

Ultra Bloomberg Natural Gas ETF (BOIL - Free Report) – Up 52.4%

iPath.B Natural Gas Subindex ETN (GAZ - Free Report) – Up 24.5%

US Natural Gas Fund (UNG - Free Report) – Up 24.2%

Microsectors Oil & Gas Exploration & Production 3X Leveraged (OILU - Free Report) – Up 18.3%

Microsectors U.S. Big Oil Index 3X ETN (NRGU - Free Report) – Up 14.5%

Direxion Daily Oil Services Bull 2X Shares (ONG - Free Report) – Up 12.4%

S&P Oil & Gas Exploration Bull 3X Direxion (GUSH - Free Report) – Up 11.3%

Energy Bull 2X Direxion (ERX - Free Report) – Up 10.1%

Ultra Oil & Gas ETF (DIG - Free Report) – Up 9.5%        

iPatha.B Energy Subindex TR ETN (JJE - Free Report) – Up 8.2%