Crude oil-related exchange traded funds are continuing their downward spiral as the global supply glut distends on increased production out of the Organization of Petroleum Exporting Countries.
On Friday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, fell 2.3% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, dropped 1.7%. Year-to-date, USO declined 34.4% and BNO decreased 33.8%.
Nymex WTI crude oil futures were 3.1% lower to $40.5 per barrel Friday while ICE Brent Crude futures were down 0.9% to $43.7 per barrel.
Crude oil prices were slipping after the International Energy Agency revealed oil stockpiles have grown to a record of almost 3 billion barrels in September, a month when inventories typically decline, as growth remained “significantly above the historical average,” reports Grant Smith for Bloomberg.
“Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the agency said. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”
The IEA said the “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia.
Additionally, oil prices could see further weakness as Iranian crude hits the market after sanctions on its nuclear program are lifted, reports Angelina Rascouet for Bloomberg.
Investors can utilize a number of inverse or bearish ETF options to hedge against further declining energy prices. For instance, the United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, and the DB Crude Oil Short ETN (NYSEArca: SZO) also tracks the simple inverse of oil. Over the past month, DNO gained 13.3% and SZO rose 13.4%. [Leveraged ETFs Are Popular Plays Among Swing Traders]