Are More Cloudy Skies Ahead for Bullish Oil Investors?

U.S. President Donald Trump’s diagnosis of the coronavirus did no favors for oil prices, which have been languishing after they rebounded from April’s dive into negative territory. Additionally, more headwinds are in store for oil, which could continue to put a bearish spin on the commodity.

“Oil prices fell 3% on Friday after U.S. President Donald Trump tested positive for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the market’s weak recovery,” noted a CNBC report last week. “Benchmark Brent and U.S. crude were both headed for a second straight week of losses. The uncertainty surrounding the U.S. president’s health added to a series of jitters, including a lackluster U.S. unemployment report and increased supply from major world oil producers.”

“It’s been a rough week – and now the president’s diagnosis sends a shudder through markets,” said John Kilduff, partner at Again Capital in New York. “The COVID-19 pandemic has weighed more on the oil market than any other asset class. This is a worst-case scenario for the oil market.”

Trading Oil Trends

In the meantime, ETF traders can take advantage of oil prices without having to trade futures of the commodity itself. Leveraged ETFs can also provide traders with the potential to make additional returns (or losses).

Short-term traders betting on even more price increases can look to ETFs like Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (NYSEArca: GUSH). GUSH seeks daily investment results, of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards.

On the bearish side of the trade, there’s the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (NYSEArca: DRIP). DRIP seeks daily investment results that equal 300% of the inverse of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index, which is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards (GICS).

For more market trends, visit ETF Trends.

THEMATIC ETF RESOURCES