ETF Trends
ETF Trends
  • U.S. shale output is slightly declining, but challenges remain on the output front from OPEC producers
  • OPEC has hinted at its desire to limit production in face of the prolonged low oil environment
  • OPEC members have been reluctant to pare production even though oil prices remain low relative to the standards set in recent years

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, has been on a torrid pace in recent weeks and an overlooked catalyst may be one of the reasons why: Favorable seasonality.

“U.S. production reached a peak of 9.6 million barrels a day in April 2015, six months after OPEC moved to a market-based strategy that sent prices skidding. U.S. oil output was lifted by the industry’s recently completed projects, and production was also supported by hedging, ready financing and technology gains. But financing is no longer easy, and some producers face real hardship, including fire sales or bankruptcy,” according to CNBC.

The good news is U.S. shale output is slightly declining, but challenges remain on the output front from OPEC producers.

OPEC has hinted at its desire to limit production in face of the prolonged low oil environment. However, Iran, which has just recently re-entered the global oil market, is only just starting to ramp up production, potentially putting a damper on plans for a OPEC cut.

In addition to Iran, other OPEC members have been reluctant to pare production even though oil prices remain low relative to the standards set in recent years. Still, seasonality should not be dismissed.

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