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Christmas Comes Early for Oil & Energy ETFs

Oil, which suffered a great deal in November, lately rallied on Russia and Saudi Arabia’s plans to extend their output cut deal into 2019. However, both parties are yet to confirm any fresh output cuts. Still, oil prices are likely to stay steady in the coming sessions on abating supply glut concerns (read: Brent in Bear Market: 4 Country ETFs to be Cautious About).

Investors should note that the Organization of the Petroleum Exporting Countries (OPEC) will meet on Dec 6 in its headquarters in Vienna, Austria, to decide on the combined output policy. Market participants are now expecting an extension or a raise in the output cut limit for the near term (read: What Does the OPEC Agreement Mean for Energy ETFs?).

Goldman Sachs believes that “a cut in OPEC and Russia production of 1.3 million barrels per day (bpd) will be required to reverse the ongoing counter-seasonally large increase in inventories.”

To add to this, Canada’s largest oil-producing province Alberta announced that it would cut production next year to boost prices. The plan announced on Sunday will slash output of raw crude and bitumen from Alberta by 325,000 barrels a day, or 8.7%, starting January till there is no excess inventory.

If the flurry of output cut news is not enough, the latest U.S.-China trade truce quelled heightened concerns of trade war and the resultant shrinkage in global growth for the time being. In the G-20 meet, China president Xi Jinping and U.S. President Donald Trump agreed to not announce any new tariff for 90 days(read: Trump-Jingping Truce to Boost These ETFs).

How to Play?

Against this backdrop, investors aiming to cash in on the latest jump or expecting more strength in this liquid commodity can bet on oil and energy ETFs. Below we highlight a few choices. These ETFs gained considerably on Monday’s trading session.

Play Oil

United States Oil Fund USO — Up 5.03% on Dec 3

The fund tracks the daily price movement of WTI light, sweet crude oil.

Invesco DB Oil Fund DBO — Up 5.2% on Dec 3

The fund seeks to track changes 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.

United States Brent Oil BNO— Up 4.7% on Dec 3

The underlying index looks to track the daily changes in percentage terms of the spot price of Brent crude oil.

Bet on Energy Stocks            

S&P Smallcap Energy Invesco ETF PSCE — Up 4.5% on Dec 3

The underlying index is designed to measure the overall performance of common stocks of U.S. energy companies.

Unconventional Oil & Gas Vaneck Vectors ETF FRAK) — Up 4.4% on Dec 3

The underlying MVIS Global Unconventional Oil & Gas Index tracks the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas.

Dynamic Oil & Gas Services Invesco ETF PXJ — Up 3.4% on Dec 3

This product is composed of stocks of about 30 U.S. companies that assist in the production, processing and distribution of oil and gas.

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PWRSH-DB OIL FD (DBO): ETF Research Reports
PWRSH-SP SC EGY (PSCE): ETF Research Reports
US-OIL FUND LP (USO): ETF Research Reports
US BRENT OIL FD (BNO): ETF Research Reports
PWRSH-DYN OIL&G (PXJ): ETF Research Reports
VANECK-UNC O&G (FRAK): ETF Research Reports
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