Additionally, U.S. production keeps pumping along as improvements in drilling technology, notably horizontal drilling and hydraulic fracturing, or so-called fracking, help squeeze oil from shale formations, despite an increase in idled oil rigs – U.S. rigs totaled 1,317 last week, the lowest level in two years.
“The drop in the rig count will have a limited impact. We’re going to see huge builds during the first quarter worldwide,” Mike Wittner, head of oil research at Societe Generale SA, said.
For those with a high conviction of further weakness in the energy space, investors can consider inverse ETF options as an alternative to options trading. The United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse or -200% daily performance of WTI crude oil, VelocityShares 3x Inverse Crude (NYSEArca: DWTI) takes the three times inverse or -300% performance of crude oil, PowerShares DB Crude Oil Short ETN (NYSEArca: SZO) tracks the simple inverse of oil, and PowerShares DB Crude Oil Double Short ETN (NYSEArca: DTO) takes also follows a -200% performance of oil. [Inverse ETF Plays for a Bearish Oil Outlook]
Potential inverse and leveraged ETF traders should be aware that these funds may diverge from their target strategy of the long-term due to compounding issues from daily rebalancing. [Do You Know How Your Leveraged ETFs Work?]
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