A Bearish Call on Oil ETF Investing

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 dealing with numerous external forces this year, including varying views on oil prices from big Wall Street banks.

Oil, as is often the case, has been volatile this year, but some market observers bullish traders should wait until 2017, pointing to next as a prime time for oil prices to really rebound. 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.

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Count Goldman Sachs among those with a less-than-enthusiastic view on oil.

Goldman’s head of commodities research Jeff Currie believes “crude will continue to trade within the US$45-50 band over the next 12 months. Any improvement above US$50 is highly unlikely,” according to OilPrice.com. “The analyst noted that the primary reason for the gloomy forecast is the simple lack of any upside potential for oil at present. He also suggested that the market may have already balanced itself at the current price levels, comparing the overall environment to that in the early 1990s when a barrel of crude sold for US$20.”


Some energy market observers are clear in their assessments and they see oil trading higher in the coming months. Some professional traders do not see the current oil bear market lasting very long. Still, 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.