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Goldman Forecasts Waning Demand: Oil ETFs to Lose

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Amid the coronavirus scare, The Goldman Sachs Group, Inc. GS is projecting a decline in oil demand globally this year. The global investment bank expects global oil demand to slide 150,000 barrels a day. Growing travel ban and majorly disturbed supply chains largely due to the spike in the number of cases outside mainland China have majorly led to the depressing forecast (read: ETFs at Risk as Oil Slides to 13-Month Low on Covid-19 Scares).

Per researchers associated with China National Petroleum Corp., the world’s biggest oil importer, China will see a 36% fall in fuel demand in the first quarter. Resultantly, around 200 million barrels of additional oil supplies will be seen in the market.

What Are Other Analysts Saying?

Goldman’s forecast comes after similar warnings published from major oil-market consultants like Facts Global Energy (FGE) and IHS Markit. FGE expects oil consumption to decline by 220,000 barrels a day. Moreover, IHS Markit has predicted the biggest decline in history of 3.8 million barrels a day in global oil demand in the first quarter of 2020 over the prior year. It also said that oil consumption in 2020 will be lower than last year even in case of a recovery in the second half.

Going on, led by deeper-than-expected refinery cuts in China, Morgan Stanley  has lowered its growth forecast to 500,000 barrels a day. Moreover, Energy Aspects Ltd. has also slashed its outlook for oil demand by 200,000 barrels a day.

This will mark the fourth time in around 40 years that oil demand will fall. Per data, except for 1993, 2008 and 2009, oil demand has risen every year since 1984.

Oil ETFs That Might Lose

Investor hopes are now dependent on the Organization for Petroleum Exporting Countries and its allies meeting in Vienna on Mar 5-6. Deeper output cuts can still provide some support to sliding oil prices. However, the difference of opinions persists between the two main leaders, Russia and Saudi Arabia. The former has shown preference toward maintaining supply at current levels while the latter is pressing for a reduction of 1.5 million barrels a day.

Against this backdrop, investors can take a closer look at the oil commodity space and related ETFs (see all Energy ETFs here).

United States Oil Fund (USO - Free Report) — down 23% year to date

The United States Oil Fund seeks to track the daily price movement of WTI light, sweet crude oil (read: Dow Jones Stages Solid Comeback: 5 Top-Ranked Stocks to Buy).

AUM: $1.52 billion

Expense Ratio: 0.73%

Invesco DB Oil Fund (DBO - Free Report) — down 21.1%

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 U.S. Treasury securities and money-market income-less expenses (read: Virus Scare Weighs on Oil ETFs: Go Short for the Near Term).

AUM: $240.5 million

Expense Ratio: 0.78%

United States Brent Oil Fund (BNO - Free Report) — down 20.1%

The fund tracks the daily price movement of Brent crude oil (read: Minimal Damage Expected From Covid-19? ETF Areas to Benefit).

AUM: $77 million

Expense Ratio: 0.90%

U.S. Commodity Funds United States 12-Month Oil (USL - Free Report)  — down 18.1%

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

AUM: $42.3 million

Expense Ratio: 0.82%

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