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, are facing plenty of obstacles. The next one might just be seasonality.
Compounding that issue is the fact that oil’s recent rebound is attracting plenty of skeptics. Others also believe the recent price recovery was not fueled by fundamental factors but more of a result to short-covering and speculation over potential production freezes among Organization of Petroleum Exporting Countries and other major producers.
SEE MORE: It’s Game Time For Oil ETFs
While production has declined in the U.S., recently rebounding oil prices are encouraging exploration and production companies to revisit spending plans with some increasing capital expenditures. That has some oil market observers concerned about a rising rig count and the subsequent impact on crude prices.
[related_stories]Traders looking to profit from falling oil prices have plenty of ETF options, including the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO), which tries to reflect the two times inverse or -200% daily performance of WTI crude oil, and DB Crude Oil Double Short ETN (NYSEArca: DTO), which also follows a -200% performance of oil.
“While longer-term Crude Oil futures seasonality is strong through September (using data from 1990-2009 via EquityClock.com), the last 5 Septembers have all been negative, with an average decline of more than 6%. It just goes to show that no one indicator is magical. Each technical indicator should be analyzed for its materiality, then incorporated into an overall weighing of bullish and bearish risks,” according to See It Market.
SEE MORE: OPEC Output Freeze Speculation Lift Oil, Energy ETFs
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.
USO “has a chance to print a bullish engulfing monthly candlestick. This is very impressive considering it fell 15% from open to close in July. This ETF comes with a performance caveat, though, as it suffers over time from contract rollover (contango),” adds See It Market.
For more information on the crude oil market, visit our oil category.
United States Oil Fund
