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Oil ETFs in Focus as US, Russia & OPEC's Output Declines

Sweta Jaiswal, FRM

A rise in oil prices was observed during early trading in Asia on Oct 1. The upside can be attributed to a decline in output levels at some of the large producers like the United States, Russia and Organization of the Petroleum Exporting Countries (OPEC) in the third quarter.

According to a Reuters’ survey, OPEC’s output slipped to the lowest monthly total production level since 2011. It came in at 28.9 million barrels per day (bpd) in September, down 750,000 bpd from the revised figure of August.

There was a drop in production levels in the United States and Russia in July and September. In comparison to 11.29 million bpd in August, Russia’s output fell to 11.24 million bpd during Sep 1-29. Furthermore, per a U.S. Energy Information Administration monthly report, a decline in federal offshore Gulf of Mexico’s production levels resulted in a 276,000-bpd reduction in U.S. crude oil output totaling 11.81 million bpd in July (read: ETFs in Focus as Oil Spurts on Rising Middle East Tensions).

Will the Trend Stay?

Oil prices are exposed to waning demand due to slowing global economic growth and the Sino-US trade spat. A slowdown in global economic growth is being observed with Trump making rampant attacks to defend his America First agenda. This has resulted in weaker currencies, soft economic growth and slashed forecasts for countries at the receiving end of his trade-related policies. The Eurozone economy has been struggling with declining demand for goods and services largely due to trade war and Brexit issues. Moreover, economic impact of the Sino-US trade war resulted in the fastest decline in Japanese manufacturing activity in seven months in September.

Also, the head of Saudi Aramco’s trading arm announced restoration of full oil production and capacity. It is worth noting here that a Reuters’ survey showed that oil prices will mostly stay stable in 2019, largely due to waning demand (read: Profit From the Oil Rush With These ETFs).

Oil ETFs in Focus

This has compelled a number of investors to take a closer look at the oil commodity space and related ETFs (see all Energy ETFs here).

United States Brent Oil Fund BNO

The fund tracks the daily price movement of Brent crude oil (read: Spate of Positive News Boosts Oil ETFs).

AUM: $79.2 million

Expense Ratio: 0.90%

YTD Return: 18.4%

United States Oil Fund USO

The United States Oil Fund seeks to track the daily price movement of WTI light, sweet crude oil (read: ETFs to Win as Saudi's New Minister May Seek Same Oil Policy).

AUM: $1.49 billion

Expense Ratio: 0.73%

YTD Return: 17.4%

Invesco DB Oil Fund DBO

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: ETFs in Focus as Rising Trade War Tensions Hurt Oil Prices).

AUM: $257.9 million

Expense Ratio: 0.78%

YTD Return: 11.7%

US Commodity Funds United States 12 Month Oil USL 

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

AUM: $52.9 million

Expense Ratio: 0.82%

YTD Return: 12.4%

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United States 12 Month Oil Fund, LP (USL): ETF Research Reports
United States Oil Fund, LP (USO): ETF Research Reports
United States Brent Oil Fund LP (BNO): ETF Research Reports
Invesco DB Oil Fund (DBO): ETF Research Reports
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