Tag: OIl ETFs

Hedging Energy Sector Oil Price Risk

Posted on by Robert Boslego

Volatility in oil prices makes investing in the energy sector a risky proposition. The collapse in oil prices following the OPEC meeting in November 2014, at which Saudi Arabia announced its intent to flood the market to put American shale oil producers out-of-business, resulted in a rout in energy equities prices.

The Energy Select SPDR ETF (XLE) fell by 37 percent from November 26, 2014, to January 20, 2016. For many investors, the drop had become too large to sustain, and they closed their positions, locking-in a substantial loss.

XLE has recovered its loss, and as of July 27th, the price was nearly identical to its value on November 26th, 2014. But the recovery in oil prices, due to heightened geopolitical risks, also makes them vulnerable to another downward correction.

Citicorp, for example, issued a forecast proclaiming that “the bull argument is based on a faulty analysis,” and that oil prices “will fall back into a band between US$45 and US$65 in just over a year.”This raises the question of whether investing in the energy sector represents an attractive risk-reward opportunity. Continue reading "Hedging Energy Sector Oil Price Risk" →

Oil and Gas ETFs Are Having a Good 2018

Posted on by Matt Thalman

Thus far in 2018, the oil and gas industry has been booming. Rig counts in the US are up, prices at the pump are up, and the oil and gas ETFs tracking the sector are up by a lot.

Investors who have been following the industry over the past year could have made some serious money as a few of the leveraged ETFs are up 238% or more. The Velocity Shares 3X Long Crude Oil ETN (UWT) is up 247% over the last 12 months and is up more than 70% year-to-date. The UBS ETRACS ProShares Daily 3X Long Crude ETN (WTIU) has risen 240% over the last year and 64% year-to-date. Finally, the Proshares UltraPro 3X Crude Oil ETF (OILU) is up 238% over the last 12 months and 63% year-to-date.

But, perhaps your less risky and don’t like investing in the leveraged ETFs? Well, you still could have done well as the United States Brent Oil Fund LP (BNO) is up 71% over the last year and 19.9% since the start of 2018. Or perhaps you went with the ProShares K-1 Free Crude Oil Strategy ETF (OILK) which is up 62% in the past 12 months and 23% year-to-date. Or either the iPath Series B S&P GSCI Crude Oil ETN (OILB) or the United States Oil Fund LP (USO) which are both up more than 61% over the last year and 23% year-to-date.

There have been some reasons why the industry has been on a tear over the last, and many of that reason don’t show signs of changing in the short term. OPEC is committed to increasing the price of oil (despite its recent modest increase in production), smaller US outfits still need slightly higher prices before they can add additional rigs and become profitable, the economy appears to be healthy and growing, US consumers have not yet begun to fell the “pain at the pump” again really. Continue reading "Oil and Gas ETFs Are Having a Good 2018" →

3 ETFs To Buy If You Think Oil Will Continue To Rise Following OPEC's Decision

Posted on by Matt Thalman

Matt Thalman - INO.com Contributor - ETFs


Last week the Organization of the Petroleum Exporting Countries or OPEC announced that the group had to come an "agreement" to reduce oil production. The new deal slated to cut production from an estimated 33.2 million barrels per day down to 32.5 million barrels per day.

While some Wall Street analysts don't believe the production reduction will actually happen, the fact remains that since OPEC made the announcement, the price of oil is up rather dramatically. Prior to the announcement oil was trading around the $44.50 range and has since jumped to the $50 range.

Many investors are looking at the price of oil and wondering how they can get a piece of this action. Let's take a look at three Exchange Traded Funds you can buy if you believe oil prices will continue to increase. Continue reading "3 ETFs To Buy If You Think Oil Will Continue To Rise Following OPEC's Decision" →

In Search of the Most Efficient Energy & Commodity ETFs

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


I wrote last week about the best oil ETFs. In the process, I discovered an interesting feature of the PowerShares DB Oil ETF (DBO), of which I had not previously been aware.

Specifically, as I described, other oil ETFs have a practice of automatically rolling into the next month’s oil futures contract when the current month contract expires – even if doing so will cause some price decay, as in “contango,” when the next month’s contract is higher priced than the current months (which commonly happens due to storage costs incurred by the party holding the physical commodity, etc). DBO, on the other hand, designed their ETF to NOT automatically roll into the next month’s futures contract, specifically to address that problem of decay, or “negative roll yield.” Instead, PowerShares uses what it calls an “Optimum Yield” formula to automatically roll into the most attractive near-month futures contract (of the next 13 months). In so doing, DBO thereby claims to optimize the fund’s “roll yield” (whether markets are in a state of contango or the opposite condition, known as backwardation). Continue reading "In Search of the Most Efficient Energy & Commodity ETFs" →