There are reasons for investors to be cautious with volatile energy ETFs. Moreover, if oil prices falls to new lows and the shale industry is unable to turn a profit, the highly leveraged industry may find it harder to repay debt obligations. The IEA said the “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia.
“Moreover, unless there is a significant cut in output, the chronic issue of supply outstripping demand will continue to weigh on global prices well into next year, especially with additional Iranian oil returning to the market in the coming months, analysts said,” according to MarketWatch.
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. [Leveraged ETFs Are Popular Plays Among Swing Traders]
United States Oil Fund
