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Oil ETFs Plunge on Hopes of Output Boost

DG vs. TJX: Which Stock Is the Better Value Option?

On account of fears that Saudi Arabia and Russia are in discussion to ease oil production limits, oil price has been declining over the past few days. Brent and U.S. crude have fallen by 6.4% and 9%, respectively, from peaks reached earlier in May (read: Are Good Times Over for the Oil Patch? ETFs to Profit).

The plunge in the oil price was also due to U.S. sanctions on Iran and a massive cut in Venezuelan oil production, which has the potential to decrease global oil supply. So Riyadh and Moscow are planning for a gradual ease of production so as not to shock the market. As of now, Saudi and Russia are planning to increase production by 1 million barrels per day.

 It was reported by Bloomberg that there are plans to increase the total daily production by 300,000 to 800,000 per day. China has shown concerns about the supply crunch. In response, the United States has been continuously increasing its production capacity with rigs drilling for petroleum has hit the highest level last week. From June, the United States is looking to export 2.3 million barrels per day out of which 1.3 million bpd will be for Asia.

Despite the current downward trend, Goldman Sachs has observed that oil prices might not go down for long. This is because oil inventories are at a five-year high, Venezuela has lost its output potential, and infrastructure issues in the Permian basin could disrupt U.S. shale production.

In this situation, let us look at the worst performing ETFs in the past one week:

ETRACS S&P GSCI Crude Oil Total Return Index ETN OILX

The note is linked to the performance of the S&P GSCI Crude Oil Total Return Index and has amassed $15.8 million in its asset base. It has average expense of 50 basis points and an average traded volume of 620 shares. OILX has returned negatively by 9.04% in the past one week.

iPath Pure Beta Crude Oil ETN OLEM

The note gives exposure to the Barclays WTI Crude Oil Pure Beta TR Index. It has an average daily traded volume of 2360 shares with an expense ratio of 0.75%. With an AUM of $2.7 million, the note has returned negatively by 7.45% in a week.

Credit Suisse X-Links WTI Crude Oil Index ETN OIIL

The note consists of unsecured debt securities which tracks the investment results of Bloomberg WTI Crude Oil Total Return Subindex. With an asset base of $44.7 million, the note has a daily trade volume of 800 shares. It has declined 7.3% in a week (read: Winners of Q1 Earnings: 5 Best ETF Charts).

United States Oil Fund USO

The fund tracks the movement of the spot price of light sweet crude oil. It has an expense ratio of 0.76% and has asset base of $1.93 billion. It has daily traded volume of 18.6 million shares and negatively returned 7.2% in the past one week.

ProShares K-1 Free Crude Oil Strategy ETF OILK

The fund provides total returns to the West Texas Intermediate crude oil futures markets. Annual expense is 65 basis points and AUM is $12.3 million. It has daily traded volume of 10,890 shares. The fund has negatively returned 7.19% in a week (read: Why to Bet on Value ETFs Right Now).

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US-OIL FUND LP (USO): ETF Research Reports
IPATH-PB CRUDE (OLEM): ETF Research Reports
X-LINKS WTI CRD (OIIL): ETF Research Reports
PRO-SH K-1 FCOS (OILK): ETF Research Reports
R-TRC GSCI COTR (OILX): ETF Research Reports
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Zacks Investment Research
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