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Oil prices remained under pressure this year on global recessionary fears. United States Oil Fund, LP (USO - Free Report) is off 8.1% this year while United States Brent Oil Fund LP (BNO - Free Report) has lost about 7.2% past month (as of Feb 3, 2023). Frequent crude stock builds amidst Gulf Coast refinery woes and the slowing down of industrial activity have weighed on the oil prices meaningfully.
The ISM U.S. Manufacturing PMI dropped to 47.4 in January, the lowest since May 2020 at the height of the covid pandemic and below market forecasts of 48. The reading marked the third successive contraction in factory activity.
Plus, electric vehicle behemoth Tesla cut its prices by 13% to 20%. The move will likely be followed by other producers of electric vehicles and that cost advantages for electric vehicles will pressurize oil prices.
Can Oil Bounce Back?
The January 2023 IMF World Economic Outlook Update projects that global growth will decline to 2.9% in 2023 but rise to 3.1% in 2024. The 2023 forecast is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook but below the historical average of 3.8%. IMF’s higher projection for global growth should augur well for oil prices. Plus, China reopened its economy at the end of the Tiger year. This was a plus for economic activities.
The looming EU restriction on Russian oil products could boost energy prices all over again. Despite Brussels offering a draft version of the product price cap which fixes a limit of $100 per barrel on high-value products of Russian origin (diesel, jet, gasoline) and a $45 per barrel cap on low-value products (fuel oil, naphtha), the EU is still yet to agree on the price cap, per oilprice.com.
Organisation of Petroleum Exporting Countries (OPEC)’s crude output fell last month as the group wanted to keep global markets in balance. Production was down 60,000 barrels a day to 29.12 million a day. OPEC agreed to maintain its planned monthly oil output. OPEC and its allies had in October last year agreed to cut oil output by 2 million barrels per day in November, the deepest reduction by OPEC+ since the 2020 COVID pandemic.
Against this backdrop, below we highlight a few oil ETFs that should be kept track of.
ETFs in Focus
Invesco DB Oil Fund (DBO - Free Report) – Down 5.1% Last Week
United States 12 Month Oil Fund LP (USL - Free Report) – Down 5.9% Last Week
ProShares K-1 Free Crude Oil Strategy ETF (OILK - Free Report) – Down 6.0% Last Week
United States Oil Fund LP (USO - Free Report) – Down 6.2% Last Week
iPath Pure Beta Crude Oil ETN (OIL - Free Report) – Down 6.4% Last Week
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Can Oil ETFs Jump in 2023 After a Low Start?
Oil prices remained under pressure this year on global recessionary fears. United States Oil Fund, LP (USO - Free Report) is off 8.1% this year while United States Brent Oil Fund LP (BNO - Free Report) has lost about 7.2% past month (as of Feb 3, 2023). Frequent crude stock builds amidst Gulf Coast refinery woes and the slowing down of industrial activity have weighed on the oil prices meaningfully.
The ISM U.S. Manufacturing PMI dropped to 47.4 in January, the lowest since May 2020 at the height of the covid pandemic and below market forecasts of 48. The reading marked the third successive contraction in factory activity.
Plus, electric vehicle behemoth Tesla cut its prices by 13% to 20%. The move will likely be followed by other producers of electric vehicles and that cost advantages for electric vehicles will pressurize oil prices.
Can Oil Bounce Back?
The January 2023 IMF World Economic Outlook Update projects that global growth will decline to 2.9% in 2023 but rise to 3.1% in 2024. The 2023 forecast is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook but below the historical average of 3.8%. IMF’s higher projection for global growth should augur well for oil prices. Plus, China reopened its economy at the end of the Tiger year. This was a plus for economic activities.
The looming EU restriction on Russian oil products could boost energy prices all over again. Despite Brussels offering a draft version of the product price cap which fixes a limit of $100 per barrel on high-value products of Russian origin (diesel, jet, gasoline) and a $45 per barrel cap on low-value products (fuel oil, naphtha), the EU is still yet to agree on the price cap, per oilprice.com.
Organisation of Petroleum Exporting Countries (OPEC)’s crude output fell last month as the group wanted to keep global markets in balance. Production was down 60,000 barrels a day to 29.12 million a day. OPEC agreed to maintain its planned monthly oil output. OPEC and its allies had in October last year agreed to cut oil output by 2 million barrels per day in November, the deepest reduction by OPEC+ since the 2020 COVID pandemic.
Against this backdrop, below we highlight a few oil ETFs that should be kept track of.
ETFs in Focus
Invesco DB Oil Fund (DBO - Free Report) – Down 5.1% Last Week
United States 12 Month Oil Fund LP (USL - Free Report) – Down 5.9% Last Week
ProShares K-1 Free Crude Oil Strategy ETF (OILK - Free Report) – Down 6.0% Last Week
United States Oil Fund LP (USO - Free Report) – Down 6.2% Last Week
iPath Pure Beta Crude Oil ETN (OIL - Free Report) – Down 6.4% Last Week