Back to top

Image: Bigstock

ETFs to Gain From the Oil Rally on US Crude Inventory Data

Read MoreHide Full Article

2019 has been a decent year so far for investors having parked their money in a commodity like oil. Moreover, OPEC has of late decided to extend the oil production cut through 2020 in a bid to boost oil prices. Russia is once again participating with OPEC in doing the same (read: OPEC Output Cut Extended to 2020: Will These ETFs Gain?).

Against this backdrop, falling US crude supplies as reflected in latest figures from the American Petroleum Institute (API) have once again spurred a spike in oil prices. In this regard, August West Texas Intermediate crude gained 1.66% (on Jul 10 at 3:24 am EDT). Moreover, International Brent Oil Futures also rose by 1.36% (as of Jul 10 at 3:58:40 am).

What is Driving This Upside?

Here are certain developments that have been triggering the uptrend in oil prices:

Depleting US Crude Inventories

The latest data from the API showed a decline of 8.1 million barrels in the U.S. crude stockpiles for the week ended Jul 5. The dip in US crude supplies exceeded the analysts’ forecasts for a decrease of 3.1 million barrels. The API report further denoted a fall of 257,000 barrels in the stockpiles for gasoline whereas distillate inventories surged by 3.7 million barrels. However, official inventory data from the Energy Information Administration (EIA) is scheduled to be released on Jul 10.

However, EIA's Short Term Energy Outlook still expects US crude oil production to rise to 12.36 million barrels per day (bpd) in 2019 from the record high of 10.96 million bpd in the previous year.

Rigs Evacuation in Gulf of Mexico

The oil price rally is also being supported by shutdown of production units and evacuation in the Gulf of Mexico as a tropical disturbance is feared to get converted into a storm in the coming days.

Progress in Sino-US Truce Talks

The escalating Sino-US trade war was anticipated to intensify concerns over decelerating global economic growth, which in turn, induces weaker spending on commodities like oil. However, latest updates on a successful round of discussion on truce talks over phone between the two strongest nations has stoked optimism for commodities like oil.

Tensions Brew Over Iran’s Nuclear Program

Iran recently increased its enrichment levels for uranium from the agreed 3.7% level under the Joint Comprehensive Plan of Action (JCPOA) act to 5%, while still keeping it below the 20% threshold. Further fueling worries, Tehran commented that it will keep breaching the agreements under the deal every 60 days lest the European signatories to the JCPOA deal safeguarded it from the US sanctions imposed by President Donald Trump.

ETFs to Shine

This has compelled many investors to look closely into the oil commodity space and these ETFs (see all Energy ETFs here).

United States Brent Oil Fund (BNO - Free Report)

The fund tracks the daily price movements of Brent crude oil (read: Top ETF Events of Wall-Street's Decade-Best June).

AUM: $91 million

Expense Ratio: 0.90%

YTD Return: 23.9%

United States Oil Fund (USO - Free Report)

The United States Oil Fund seeks to track the daily price movements of WTI light, sweet crude oil (read: Iran Downs U.S. Drone: Sector ETFs & Stocks to Gain).

AUM: $1.49 billion

Expense Ratio: 0.73%

YTD Return: 24.6%

Invesco DB Oil Fund (DBO - Free Report)

The fund tracks changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the holdings of primarily US Treasury securities and money market income less expenses (read: How to Trade Oil Rush With These ETFs).

AUM: $284.4 million

Expense Ratio: 0.78%

YTD Return: 19.7%

US Commodity Funds United States 12 Month Oil (USL - Free Report)

The fund replicates with possible accuracy the movements of West Texas Intermediate light, sweet crude oil.

AUM: $54.2 million

Expense Ratio: 0.82%

YTD Return: 21.3%

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

US-OIL FUND LP (USO) - free report >>

US-12 MONTH OIL (USL) - free report >>

US BRENT OIL FD (BNO) - free report >>

INVS-DB OIL FD (DBO) - free report >>