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.
Various oil exposures account for about a quarter of DBC’s weight. OPEC output has declined for several straight months while Russia, the largest non-OPEC producer, has been trimming production since late 2016. Yet, oil prices continue sliding, proving the point that U.S. production is contributing to lower prices.
“Energy speculators have been highly focused on US crude oil reserves, and many lost patience while the markets rebalanced in Europe and Asia. A roughly 5% sell-off in West Texas Intermediate crude on May 4 had all the hallmarks of a capitulation in a market where sentiment has grown shaky,” said PowerShares.
If commodity traders fear that the weakness will persist, there are a number of inverse ETFs that hedge against falling commodities. For instance, the DB Commodity Short ETN (NYSEArca: DDP) takes the simple short position on a group of diversified commodities. The DB Commodity Double Short ETN (NYSEArca: DEE) takes the two times the inverse position on a basket of commodities.
For more information on the commodities market, visit our commodity ETFs category.