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 down an average of 13.2% year-to-date.
Some of the struggles of oil and the energy sector this year can be pinned on investors’ concerns regarding the ability of major oil-producing nations, including the Organization of Petroleum Exporting Countries (OPEC), to effectively reduce production.
While OPEC is cutting back to alleviate price pressures, U.S. fracking companies could jump to capitalize on the windfall as crude oil prices jump back above $50 per barrel – according to some estimates, shale oil producers can get by with oil at just over $50 per barrel due to advancements in technology and drilling techniques that have helped cut down costs.
Saudi Arabia is eyeing oil at $60 barrel this year, a comfortable price for many OPEC members, but probably not high enough to encourage U.S. shale producers to significantly increase their rig counts. Saudi Arabia is OPEC’s largest producer.
“With prices retracing all of the gains made since the OPEC deal was announced back in November, the cartel faces the prospect of losing market share without any meaningful effect on prices. And with inventories still breaking new records in the U.S., the supply picture looks pretty dismal as well,” reports OilPrice.com.
Active traders now have some new choices to profit from big moves in crude prices. ProShares rolled out the ProShares UltraPro 3x Crude Oil ETF (NYSEArca: OILU) and ProShares UltraPro 3x Short Crude Oil ETF (NYSEArca: OILD) debuted on Monday.
ProShares also offers 2x and -2x crude oil ETF plays. The ProShares Ultra Bloomberg Crude Oil (NYSEArca: UCO) takes two times or 200% daily performance of WTI crude oil and the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse or -200% daily performance of WTI crude oil.
“Nothing concrete will be agreed to until they meet in April. At that meeting, a formal recommendation will be proposed on whether or not the cuts should be extended. Then, the agreement will be finalized at the May 25 meeting. Oil analysts are looking for clues on whether or not OPEC will succeed in keeping everyone on the same page for an extension,” according to OilPrice.com.
For more information on the crude oil market, visit our oil category.