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Oil ETFs Up on Surprise OPEC+ Output Cut

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Oil prices increased considerably on Sep 5 as OPEC+ producers agreed a small oil output cut. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided to cut production targets by about 100,000 barrels per day from October. Energy analysts had mostly expected the group to stick with its production policy.

Last month, OPEC+ agreed to boost oil output by just 100,000 barrels per day, per a CNBC article. OPEC+ said in a statement that Monday’s decision to revert back to August levels of production was because the upward adjustment was “intended only for the month of September,” as quoted on the same CNBC article. The next OPEC+ meeting is scheduled for Oct 5.

Oil prices have declined around 25% since early June after reaching multi-year highs in March. The fall has been triggered by growing concerns that global (including the United States) interest rate hikes and Covid-related restrictions in parts of China could slow global economic growth and curtail lower oil demand.

Notably, the Fed rate hikes have resulted in higher U.S. dollar. Since most commodities are traded in the U.S. dollar, a rise in it is a headwind to oil prices. Invesco DB US Dollar Index Bullish Fund (UUP) is up 4% in the past three months.

Meanwhile, lockdown measures in China's southern technology hub of Shenzhen relaxed on Monday as new infections showed signs of easing though the city remains on caution, per Economic Times. Plus, talks to recover the West's 2015 nuclear deal with Iran, potentially giving a supply boost from Iranian crude returning to the market, has fallen into a complication.

Against this backdrop, below we highlight a few oil ETFs that could be tapped for short-term gains.

iPath Pure Beta Crude Oil ETN (OIL - Free Report)

The underlying S&P GSCI Crude Oil Total Return Index is a sub-index of the S&P GSCI Commodity Index and reflects the returns that are potentially available through an unleveraged investment in the WTI crude oil futures contract. The ETN charges 57 bps in fees.

United States 12 Month Oil Fund LP (USL - Free Report)

The underlying WTI Light Sweet Crude Oil Index reflects the daily changes of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma. This is done by tracking the changes in the average of the prices of the 12 futures contracts for WTI oil on the NYMEX, consisting of the near month and the contracts for the following 11 months for a total of 12 consecutive contracts. The fund charges 90 bps in fees.

ProShares K-1 Free Crude Oil Strategy ETF (OILK - Free Report)

The underlying Bloomberg Commodity Balanced WTI Crude Oil Index aims to track the performance of three separate contract schedules for WTI crude oil futures, which are reset on a semiannual basis. The fund charges 67 bps in fees.

Invesco DB Oil Fund (DBO - Free Report)

The underlying DBIQ Optimum Yield Crude Oil Index Excess Return Index is a rules-based index composed of futures contracts on Light Sweet Crude Oil (WTI) and is intended to reflect the performance of crude oil. The fund charges 77 bps in fees.

United States Oil Fund LP (USO - Free Report)

The underlying West Texas Intermediate Light Sweet Crude Oil Index looks to reflect the daily changes of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma. The fund charges 81 bps in fees.

MicroSectors Oil & Gas Exp. & Prod. 3x Leveraged ETN (OILU - Free Report)

The underlying MicroSectors Oil & Gas Exploration & Production Index is a total return index that tracks the stock prices of large-capitalization companies that are domiciled and listed in the U.S. and that are active in the exploration and production of oil and gas. The fund charges 95 bps in fees.

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