Following one of the most stunning presidential elections in American history, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained nearly 2% on below average volume Wednesday. Still, data suggest some oil bulls are taking a respite from the commodity.
That ahead of a widely anticipated meeting for the Organization of Petroleum Exporting Countries (OPEC) later this month.
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day. While Saudi Arabia, OPEC’s biggest producer, has agreed to reduce output, Iran, Libya and Nigeria might not follow suit.
Obviously, production is a key element in the decision-making process regarding energy investments. Currently, oil investors face conflicting reports regarding output. For example, Venezuela’s crude output is plunging to multi-year lows while Algeria is looking to boost production.
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“According to Reuters, hedge funds ramped up their net long positions by 218 MMBO in the two weeks after the surprise accord was reached at the end of OPEC’s Sept. 28 meeting. The deal sparked a short-covering rally, resulting in the unwinding of many extra bearish positions. Prices have since returned to their pre-deal levels,” reports OilPrice.com.
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. Russia has also signaled it might trim output as much as some traders have hoped for.
SEE MORE: Energy ETFs Rally as Russia Joins OPEC in Considering Supply Limits
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.
[related_stories]“While managers have pulled back on their bullish stance, bearish outlooks for oil remain lower than before the OPEC agreement was announced. Managed money short positions are down 56 percent from September 27 (one day before the agreement was announced) and 52 percent less than October 27 of last year, when oil prices were still heading down,” according to OilPrice.com.
United States Oil Fund
