A Bold Call on Oil ETF Prospects

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 among this year’s worst-performing commodities exchange traded products, but some oil market observers believe the downtrodden commodity can make a comeback.

Some oil market observers believe OPEC’s influence is waning. 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.

In a reversal of previous sentiments, Saudi Arabia accepted Iran’s higher output target as a special case. Previous OPEC talks broke down after Iran, which suffered from curtailed exports under strict global sanctions, argued for increasing its output to pre-sanction levels. However, there are some potential problem children within the cartel that could undermine the output reduction effort

“Bill Strazzullo, chief market strategist at Bell Curve Trading — who correctly called for crude’s plunge to the $30 range back in 2013 — said oil could be on the verge of a massive rally that would send the commodity to levels not seen in three years,” reports CNBC.

Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices. Rig counts have recently ticked higher and with credit and earnings issues improving for some U.S. shale drillers, those companies may seize the opportunity to exploit higher pricing in the near-term.

“The whole pricing structure has shifted lower. But when you look at the new structure, the bottom is still around $30 a barrel. We think fair value is up around $60, and probably the upper end of the range is $80 to $90,” CNCB reports, citing Strazzullo.

Some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.

Rig counts have recently ticked higher and with credit and earnings issues improving for some U.S. shale drillers, those companies may seize the opportunity to exploit higher pricing in the near-term.

For more information on the crude oil market, visit our oil category.

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