Despite Retreating Oil Prices, A Bold Call on a New Rally

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), have recently been pulling back, but retreating oil prices could give astute investors an opportunity to get involved before the commodity’s next move higher.

As is usually the case, supply and demand remains a key issue for oil markets and the related exchange traded products. Production is declining in some places, but is rising in others.

For example, Venezuela’s output is at multi-year lows. However, supply is coming back online in Nigeria and Algeria is expected to ramp up output. All three countries are OPEC members.


Some concerned oil market participants believe oil is rallying without strong fundamental cause. A case can be made that oil’s rally is defying still troubling supply dynamics and tepid demand.

Elevated levels of production remain an issue for oil as well. OPEC has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers. The International Energy Agency expects it will take several years before OPEC can effectively price out high-cost producers.

Related: A Factor that Could Hinder Oil ETF Investing

Still, some oil market observes see encouraging signs on the commodity’s charts.