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Bull & Bear Tug of War for Oil: ETFs in Focus

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Oil prices have been seesawing of late on the coronavirus threat and producers’ inability to crack an output cut deal. The liquid commodity slumped more than 20% on Monday recording their worst single-day declines since the start of the first Gulf war in 1991. However, the commodity staged a recovery in the pre-market with United States Oil Fund, LP (USO - Free Report) adding about 7.4%, at the time of writing.

After talks with Russia turning futile, Saudi Arabia’s surprise decision to increase crude output from next month caused a crash in the oil patch on Monday. Russia did not agree with Saudi Arabia’s proposed plan to cut production to manage the impact of coronavirus.

Saudi Arabia now intends to raise oil output from next month, probably more than 10 million barrels a day, as a response to the breakdown of OPEC+ alliance with Russia. Saudi also cut its export prices to encourage more buying from refiners. This will definitely trigger a price war in the oil market.

Russia, one of the world’s top producers, also hinted that it could boost output. It also indicated that it could survive with low oil prices for six to 10 years. While the supply side is overflowing with output, demand side is shrinking. The International Energy Agency warned that oil demand will likely decline in 2020 for the first time since 2009.

Notably, the current output cut program will expire at the end of March, meaning OPEC+ can produce as much oil as they want beginning April 1. While we expect some price gains in oil in the coming days thanks to the bargain hunting, outlook remains dicey.

ETFs in Focus

This has compelled investors to look into the oil commodity world and in turn these ETFs (see all Energy ETFs here).

United States Brent Oil Fund (BNO - Free Report) – Down 21.9% on Mar 9

Invesco DB Oil Fund (DBO - Free Report) – Down 16.7% on Mar 9

United States 12 Month Oil Fund LP (USL - Free Report) – Down 19.8% on Mar 9

We highlight a few regular energy ETFs that should also be closely watched.

VanEck Vectors Unconventional Oil & Gas ETF (FRAK - Free Report) – Down 32.0% on Mar 9

SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) – Down 35.6% on Mar 9

John Hancock Multifactor Energy ETF (JHME - Free Report) – Down 22.3% on Mar 9

Investors can also take a look at the below-mentioned inverse ETFs. These could be beneficial if oil prices keep struggling in the coming days.

ProShares UltraShort Bloomberg Crude Oil (SCO - Free Report) – Up 51.2% on Mar 9

DB Crude Oil Double Short ETN (DTO - Free Report) – Up 40.8% on Mar 9

Direxion Daily Energy Bear 3X Shares (ERY - Free Report) – Up 60.47% on Mar 9

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