Investors may have to get use to the idea of double-digit oil prices sticking around for the near-term. Consequently, exchange traded fund traders can capitalize on countries that rely on heavy crude imports.
“This is an oil shock that was supply-driven and the supply was created by new technology,” BlackRock’s Chief Exeuctive Officer and co-founder Larry Fink said on Bloomberg. “New technology is going to create a permanent reduction in the cost of petroleum products.”
Fink argues that without an end to the supply glut, prices would only rebound to about $70 or $80 per barrel. West Texas Intermediate crude oil futures declined 4.2% to $48.9 per barrel Thursday while Brent crude futures dipped 1.8% to $60.5 per barrel.
The United States Oil Fund (NYSEArca: USO), which tracks WTI futures, declined 8.4% so far this year and plunged 49.0% over the past year.
Crude oil prices could remain depressed as the Organization of Petroleum Exporting Countries maintains its high output in an attempt to price out high-margin producers, such as those in the U.S., from the market. Additionally, the oil boom in the U.S. could keep growing as improvements in drilling technology helped offset spending cuts.
Consequently, Fink contends that oil-importing countries, like India and China, will benefit from cheap oil prices.