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Output Cut Quota Not Decided Yet: Short Oil & Energy ETFs

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Oil, which suffered a great deal in November, started rallying at the start of the month on hopes of fresh output cut in the OPEC meeting held in Vienna on Dec 6. But pouring cold waters on hopes of all oil investors, OPEC ended the meeting without a decision on how much crude should be taken off the market. However, the cartel reportedly agreed to cut output (read: Christmas Comes Early for Oil & Energy ETFs).

OPEC started cutting supply in partnership with Russia and several other nations from last year to boost oil prices. Though the liquid commodity staged a rebound at first, surging U.S. supplies and softer-than-expected U.S. sanctions against Iran’s energy sector pushed the commodity into the bear market recently. Prices have fallen by more than 30% since hitting a four-year high in October(read: Brent in Bear Market: 4 Country ETFs to be Cautious About).

Thus, in order to re-energize the commodity, Russia and Saudi Arabia reportedly planned to extend their output cut deal into 2019. However, Moscow has not yet specified about the quota it intended to cut under the fresh deal.

Also, the main agenda under debate on Dec 6 was if all OPEC members should cut production equally or if Saudi Arabia and other larger producers should lead the way. “Libya, Iran, Nigeria and Venezuela, for instance, have argued for special exemptions from the cuts,” per Wall Street Journal.

This behavior of the cartel looks like a “disunity more than unity,” per John Kilduff, founding partner at energy hedge fund Again Capital. To make matters worse, the United States last week became the net oil exporter for the first time on record.

So, there are less chances of oil prices outperforming if the discussion with Russia does not mature and the OPEC does not reach a deal. And investors who are eyeing to cash in on the latest can short oil and energy ETFs. Below we highlight a few choices:

Short Oil

ProShares UltraShort Bloomberg Crude Oil (SCO - Free Report) ) — Up 4.2% on Dec 6

SCO tracks the Bloomberg WTI Crude Oil Subindex to provide twice the inverse performance, on a daily basis of WTI crude oil (see all inverse commodity ETFs here).

UBS ETRACS ProShares Daily 3x Inverse Crude ETN (WTID - Free Report) ) – Up 6.3% on Dec 6

This underlying index is composed entirely of WTI crude oil futures contracts and is derived by reference to the price levels of the futures contracts on a single commodity as well as the discount or premium obtained by rolling hypothetical positions in such contracts forward as they approach delivery.

Short Energy Stocks

ProShares UltraShort Oil & Gas ETF (DUG - Free Report) ) — Up 3.8%

This fund seeks two times (2x) leveraged inverse exposure to the daily performance of the Dow Jones U.S. Oil & Gas Index.

Direxion Daily Energy Bear 3x Shares ETF (ERY - Free Report) ) – Up 5.3%

This product provides three times (3x) inverse exposure to the Energy Select Sector Index.

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