Oil Price Volatility in 2024 Puts These ETFs in Play

2024 should provide new opportunities in the oil sector. Another year of volatility should give traders enough to work with. As part of their proverbial tools of the trade, they can use the Invesco DB Oil Fund (DBO) and the Invesco Dynamic Oil & Gas Services ETF (PXJ).

In addition to the typical macroeconomic forces and geopolitical factors as of late, OPEC should continue to sway prices as 2024 gets underway. As OilPrice.com reported, OPEC agreed to a supply cut last month to help boost oil prices, which retreated just before the holiday season. The anticipation, based on forecasts from OPEC, the International Energy Agency, and the U.S. Energy Information Administration, was that the first half of 2024 would see weaker demand for oil. However, that cut did little in terms of making a tangible impact on prices.

“I don’t think a three-month cut is long enough to make a meaningful difference in terms of physical supply even if everyone stuck to it,” said commentator Adi Imsirovic, per the OilPrice.com report, with another analyst saying that “cuts are only scheduled to last for three months. And it can take up to one or two months for cuts to be implemented.”

“Unfortunately, we won’t have an idea of January output until the end of that month. And this is a long time in the oil market,” Investec’s head of commodities, Callum Macpherson, also said.

Given the uncertainty, oil could remain in a sideways trend until a supply or other market shock moves the needle on prices. Market fluctuations should give traders opportunities to play the price movements. That’s especially so when buying on the dip in funds like DBO and PXJ.

Easy Oil Price Exposure

As opposed to trading in futures contracts, funds like DBO and PXJ offer easy exposure. DBO offers investors convenient, cost-effective exposure to energy commodity futures. Its underlying index comprises futures contracts on light sweet crude oil (WTI), the U.S. crude benchmark.

PXJ offers an alternate play on oil prices via companies that support the industry. The fund’s underlying index comprises 30 U.S. companies that assist in the production, processing, and distribution of oil and gas. The index therefore includes companies that are engaged in the drilling of oil and gas wells, manufacturing oil, and gas field machinery and equipment.

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