How Seasonality Could Affect Oil ETFs

Like many commodities exchange traded products, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, can be subject to some seasonal factors and that is worth remembering as the fourth quarter gets underway.

Oil is also likely to get some help from now dwindling bets that the Federal Reserve will raise interest rates in the coming months. Raising interest rates would likely boost the dollar, in turn pressuring dollar-denominated commodities such as oil.

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“Meanwhile, it is significant to add that a feature of Q4 in past years has been a slide in oil prices. With that in mind, and the falls we’ve seen since the OPEC deal was announced, we could be set for the seasonal slump,” according to

That could also figure into the performance of equity-based energy strategies, which some investors are betting will finally deliver increased earnings.

The growth is not surprising as the energy sector has been one of the worst areas in earnings growth. For Q3 2016, the sector is expected to reveal its largest year-over-year earnings decline of 66%, the worst performance of all 11 S&P 500 sectors.