“Greater productivity in shale, startups of already sanctioned other non-OPEC projects and a greater willingness of OPEC to keep production levels elevated create a confluence of deflationary pressures for both oil and North American natural gas prices,” Goldman analysts said. “We now assume WTI oil prices of $57/$60/$60 per barrel in 2016/17/18.”
Consequently, ETF investors may be back to inverse options as a way to hedge or capitalize on the fall in oil. For instance, the United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, DB Crude Oil Short ETN (NYSEArca: SZO) tracks the simple inverse of oil, ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse or -200% daily performance of WTI crude oil, DB Crude Oil Double Short ETN (NYSEArca: DTO) also follows a -200% performance of oil and VelocityShares 3x Inverse Crude (NYSEArca: DWTI) takes the three times inverse or -300% performance of crude oil. [Investors Capitalize on Oil Swings with Leveraged ETFs]
Moreover, the investment bank contends that the “lower-for-longer oil price” would “put significant pressure” on integrated oil companies and potential force some to rethink on dividends, notably singling out BP and Staoil for downgrades to “sell” from “neutral,” Reuters reports.
For those seeking a hedge to the equities side, the ProShares Short Oil & Gas (NYSEArca: DDG) tries to reflect the inverse, or -100%, daily performance of the Dow Jones U.S. Oil & Gas Index. The UltraShort Oil & Gas ProShares (NYSEArca: DUG) takes two times the inverse, or -200%, daily performance of the Dow Jones U.S. Oil & Gas Index. Lastly, the Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY) reflects three times the inverse, or -300%, daily performance of the energy select sector index.
For more information on the oil market, visit our oil category.
Max Chen contributed to this article.