For Immediate Release
Chicago, IL –March 22, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: United States Oil Fund (USO - Free Report) , United States Brent Oil Fund (BNO), ProShares Ultra Bloomberg Crude Oil ETF (UCO - Free Report) , ProShares UltraPro 3x Crude Oil ETF (OILU - Free Report) and DB Crude Oil Short ETN .
Here are highlights from Thursday’s Analyst Blog:
Make the Most of the Oil Rush with These ETFs
After feeble trading at the end of last year, oil price made a nice comeback and is hovering around this year’s high on OPEC-led fresh crude output cuts and falling output from Iran and Venezuela due to U.S. sanctions. Notably, oil price in New York has rallied 30% this year so far (read: Oil Jumps: 4 ETFs to Benefit & 4 to Suffer).
The Organization of the Petroleum Exporting Countries (OPEC) has agreed to curb production by 1.2 million barrels per day during the first six months of 2019 in order to tackle global supply glut and rebalance the oil market. The 14-member OPEC cartel has agreed to reduce its output by 800,000 barrels per day, while Russia and the allied producers will take off 400,000 barrels per day from the market. Further, the Fed’s dovish outlook, which pushed the U.S. dollar down, led to a spike in oil price. Notably, a weak dollar made dollar-denominated assets cheap for foreign investors, potentially raising demand for commodities.
However, renewed fears of global slowdown and lingering uncertainty surrounding the US-China trade deal have dampened the outlook for oil demand, thereby capping the oil rally. Additionally, U.S. crude oil production has risen more than 2 million barrels per day since early 2018 to around 12 million barrels per day, making the United States the world's biggest producer ahead of Russia and Saudi Arabia. The combination of higher domestic production and prospect of reducing demand is weighing on the oil price.
Given the clouds over the outlook for oil investment, investors should place their bet on oil ETFs cautiously or could take advantage of the quick turn in sentiment with the help of leveraged or inverse ETFs.
These ETFs might be easier plays for investors seeking to deal directly in the futures market.
United States Oil Fund: This is the most popular and liquid ETF in the oil space with an AUM of $1.6 billion and average daily volume of more than 28.3 million shares. The fund seeks to match the performance of the spot price of West Texas Intermediate (WTI or U.S. crude). The ETF has 0.45% in expense ratio (read: Wall Street's Best Start Since 1987: Top ETFs of Top Sectors).
United States Brent Oil Fund:This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through future contracts. It has amassed $97.6 million in its asset base and trades in a good volume of roughly 360,000 shares a day. The ETF charges 75 bps in annual fees and expenses.
Leveraged Oil ETFs
Investors who are bullish on oil may consider a near-term long on the commodity with the following ETFs depending on their risk appetite.
ProShares Ultra Bloomberg Crude Oil ETF:This fund seeks to deliver twice (2x or 200%) the returns of the daily performance of the Bloomberg WTI Crude Oil Subindex, which consists of futures contracts on crude oil. It has $442.3 million in AUM and trades in heavy volume of about 3.5 million shares a day on average. Its expense ratio came in at 0.95%.
ProShares UltraPro 3x Crude Oil ETF:This ETF offers three times exposure to the daily performance of the Bloomberg WTI Crude Oil Subindex. The fund has amassed $137.9 million in its asset base and trades in solid average volume of 802,000 shares. It charges investors 95 bps in annual fees (read: How to Play Oil Rally With Leveraged ETFs).
Inverse Oil ETFs
Any negative news flow could provide investors’ a near-term short opportunity on the commodity according to their risk appetite.
DB Crude Oil Short ETN:This is an ETN option and arguably the least risky choice in this space as it provides inverse exposure to the WTI crude without any leverage. It tracks the Deutsche Bank Liquid Commodity Index – Oil – which measures the performance of the basket of oil future contracts. The note is unpopular as evident from an AUM of $0.9 million and average daily volume of under 1,000 shares a day. Its expense ratio is 0.75%.
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