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 6.3% year-to-date and the Organization of Petroleum Exporting Countries (OPEC) is not the primary reason why.
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.
“The U.S. used to prohibit the export of crude oil, a prohibition that was removed at the end of 2015. Since then, exports have inched up bit by bit. But in the fourth quarter of 2016, exports began to surge, a rapid rise that has extended into this year. In February, the latest month for which data is available, U.S. exports climbed to a record high 31.2 million barrels,” according to OilPrice.com.
Thanks to the shale boom, the U.S. is now a major oil exporter, which could threaten oil prices. In fact, China has become a major buyer of U.S. crude.
“As China saw the flows from OPEC countries reduce, it turned to the U.S. for oil in February, buying up more than 8 million barrels from American producers, or almost four times the volume that it purchased in January. The OPEC cuts came at a time when China is importing more oil than ever, and the U.S. appears more than willing to fill that need,” notes 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.
For more information on the crude oil market, visit our oil category.