This Would be Good for Oil ETFs

Oil prices climbed Thursday, helping the energy sector to lead an impressive rally by U.S. stocks and the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, to solid gains.

After losing more than 40% apiece last year, USO and BNO are long way from being out of the woods and it is going to take more than one day of gains to snap oil’s bearish trend. In fact, significant upside appears to be a far-flung notion for oil and the related exchange traded products as bearish forecasts for crude keeping piling up. However, that is not preventing some analysts from making bullish calls on crude.

“The ever-declining U.S. oil rig count should really start to take a bite out of the oversupply problem this year, KLR Group’s John Gerdes said Thursday, predicting depressed crude prices could soon begin to move sharply higher,” reports CNBC.

That call comes as bearish oil forecasts courtesy of Wall Street banks have recently been mounting. While crude oil prices are breaking down, Wall Street analysts anticipate further weakness ahead. Morgan Stanley analysts, including Adam Longson, head of energy commodity research, argue that investors are putting too much emphasis on fundamental factors and are not paying attention to an appreciating U.S. dollar.

Goldman Sachs Group has also forecast oil to drop to $20 per barrel but attributes further weakness to potential storage tank limits as producers keep pumping until they completely fill up storage space and halt some production.