Can U.S.-China Trade Deal Help Drive Up Oil Prices in 2020?

2019 was more kind to the bears than it was to the bulls when considering oil prices as demand for crude has been in the doldrums for most of the year. However, the U.S.-China trade deal could be the proverbial tide that lifts all boats, including oil prices.

Can the recent “phase one” trade deal agreed to by both nations help spur demand for oil in 2020?

“This year, oil demand growth has been at its weakest since 2011, as slowing global economic growth and the U.S.-China trade war weighed on every economy in the world, including on the fastest-growing oil import markets in Asia—China and India,” wrote Tsvetana Paraskova in “The phase one trade deal last week is a de-escalation of the trade dispute and could help the outlook on oil demand growth for 2020. Almost all forecasters and analysts expect demand growth to pick up next year from the very low growth this year. WoodMac sees oil demand growth more than doubling to 1.35 million bpd from just 600,000 bpd this year, thanks to marine diesel fuels in China and natural gas liquids (NGLs) demand for the growing U.S. petrochemicals capacity.”

Bullish oil traders looking for leveraged ETFs can consider the following:

  1. UBS ETRACS ProShares Daily 3x Long Crude ETN (NYSEArca: WTIU): provides a daily long leveraged exposure to the performance of the Bloomberg WTI Crude Oil Subindex ERSM. The index is designed to measure the return from a rolling long position in WTI crude oil futures contracts that trade on major U.S. exchanges.
  2. United States 3x Oil (NYSEArca: USOU): seeks the daily changes in percentage terms of its shares’ per share NAV to reflect three times the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil less the fund’s expenses. USCF will endeavor to have the notional value of the fund’s aggregate exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of the fund’s NAV. The Benchmark Oil Futures Contract is the futures contract on light, sweet crude oil as traded on the NYMEX, traded under the trading symbol “CL” (for WTI Crude Oil futures).
  3. VelocityShares 3x Long Crude Oil ETN New (NYSEArca: UWT): seeks to replicate, net of expenses, three times of the S&P GSCI® Crude Oil Index ER. The index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts.

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