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Crude Slips for 10th Day in a Row, Hurting Oil ETFs

This article was originally published on ETFTrends.com.

Crude slipped for the 10th day in a row on Friday as an unanticipated spike in supply depressed prices even further, putting the hurt on three of the largest oil ETFs--United States Oil (USO), Invesco DB Oil (DBO) and United States Brent Oil (BNO).

USO fell slightly--0.39%, while DBO and BNO both dropped by about 0.53%. The losses were part of a much bigger drop as the bear market in oil has resulted in its longest losing streak since the middle of 1984, based on Refinitiv data.

Oil analysts point to a combination of higher-than-expected output from key producers and a gloomy outlook for oil demand. The decline in prices is an about-face from last month's rally that saw oil hit four-year highs based on the assumption that supply would be crimped due to reduced output from Iran as a result of the U.S. leveling sanctions.


Source: tradingeconomics.com

Source: tradingeconomics.com

"The market's not tight. I think there are windows where you could perceive it to be tight, and I think the markets got caught into that," said Christian Malek, head of EMEA oil and gas research at J.P. Morgan. "The reality is that we're still in a world where we're overproducing and we've got surplus."

Oil prices sank to correction territory on Thursday while the major stock indexes have been rallying, and are poised for a gain to end a midterm election week after a healthy dose of volatility in October. The Dow Jones Industrial Average fell over 150 points as of 11:40 a.m. ET, but is up 3.1% through Thursday's close.

The stock markets were spurred on via a midterm election rally, which resulted in the Democrats regaining majority in the House of Representatives, while the Republicans maintained control of the Senate. The general consensus among analysts is that a divided Congress will create political gridlock, which typically benefits the capital markets.

Barring major declines through the market close, the indexes should end the week up, which investors will welcome with open arms. October will be a memorable month for stocks, which were racked by swings of volatility after an extended bull run the last 10 years.

This is a stark contrast to the oil markets, which has seen prices fall 20% in the last month.

“You have a trifecta of supply, demand and sentiment,” said Frank Verrastro, senior vice president at the Center for Strategic and International Studies. “Supply is up. Demand is down. And sentiment is more complicated about how severe the Iranian sanctions will be.”

Related: Oil ETFs Retreat Ahead of OPEC Meeting

For more news regarding oil ETFs, click here.

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