For Immediate Release
Chicago, IL – February 01, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the United States Brent Oil (BNO), United States Oil (USO) and PowerShares DB Energy ETF (DBE).
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Here are highlights from Friday’s Analyst Blog:
Can Oil ETFs Sustain Recent Rally?
Oil prices have been on a roller-coaster ride this year. Brent crude tested a fresh 12-year low to start the year and U.S. crude fell to a seven-year low sparking off fears of a correction in global stocks. In such a backdrop, oil prices suddenly bounced back and are now on their way to log the second-weekly gains (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs).
Expectations of a deal among oil-producing countries to counter ample supplies are said to have been behind this jump. Brent futures have surged more than 25% since its intraday low of $27.10 per barrel on January 20, per Reuters.
Going by the Reuters report, the rally in Brent crude took shape after Russia commented that OPEC top-brass Saudi Arabia had suggested an output cut of up to 5%. If this plan materializes, it would be ‘the first global deal in over a decade’ to reduce crude surplus and boost slumping prices.
Apart from deal hopes, the latest winter storm helped the entire energy space to heat up. Short-term demand for heating oil lent the space a hand last week. Also, an acute plunge in prices to start 2016 made the space surprisingly cheap. As a result, bargain hunting was up among investors who started to view the present price as the bottom (read: Cold Snap Sparks Sudden Rally in Oil Price: ETFs Surge).
Further, hopes of extra economic stimulus in the Euro zone and Japan boosted confidence in the global economy, thereby helping the case for global oil demand. Meanwhile, the Fed also stayed put where it was in its December meeting, keeping the rates unchanged. All these shored up oil prices in the last few days.
As a result, United States Brent Oil (BNO) – designed to track the daily changes in the spot price of Brent crude oil – added over 14.5% in the last five trading sessions (as of January 28, 2016).
On the other hand, United States Oil (USO) − designed to track the movements of light, sweet crude oil (WTI) advanced 8.4% in the last five trading sessions (as of January 28, 2016) (read: Top ETF Stories of 2015).
PowerShares DB Energy ETF (DBE) − which offers exposure to futures contracts on some of the most heavily traded energy commodities in the world including light sweet crude oil, heating oil, Brent crude oil; RBOB Gasoline & natural gas – was up 6.1% in the last five trading sessions (as of January 28, 2016).
Will the Rise Continue?
There are very little hopes for a sustained recovery for this long-beleaguered commodity. Along with several other analysts, even we believe that the chance of a meaningful production cut is unlikely. OPEC is unlikely to give up its upper hand in oil production and let non-members like U.S. and Russia gain a sizable market share (read: Profit From Sub-$40 Oil with These ETFs).
At the December 4 OPEC meeting, no output cut was agreed upon despite a supply glut and falling demand on global growth worries. Forget output cut, Saudi-led OPEC even scrapped the ceiling on production. In fact, a Gulf OPEC delegate commented, as noted by Reuters, that the call for the output cut was not from Saudi Arabia. It actually came from Venezuela and Algeria.
Meanwhile, possibilities of more oil to come on stream thanks to the Iran sanctions’ lift-off are there to ruin the prospects of the oil price recovery. And as far as global growth worries are concerned, things have a long way to go before a full-fledged improvement.
So, investors with high hopes on continued oil price recovery should rein in their enthusiasm. Per Reuters, even after the latest jump in prices, oil volatility reached an almost a seven-year high to account for the forthcoming instability.
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US BRENT OIL FD (BNO): ETF Research Reports
US-OIL FUND LP (USO): ETF Research Reports
PWRSH-DB EGY FD (DBE): ETF Research Reports
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