Covid-19 continues to be the wild card in the markets despite economies around the world trying to reopen around the pandemic. Nonetheless, even as the commodity continues to face headwinds, some market experts say oil is still in a good position.

“Oil rose more than 1% on Wednesday, supported by U.S. government data that showed crude and fuel inventories dropped last week, although concerns about the ongoing coronavirus pandemic capped gains,” a CNBC article said. “U.S. crude, gasoline and distillate inventories all fell last week, Energy Information Administration data showed. Crude inventories fell by 1.6 million barrels, less than forecast; gasoline stocks dropped more than expected, sliding by 4 million barrels; while distillate stockpiles posted a surprise drawdown of 3.4 million barrels.”

“The distillate overhang that we’ve seen most of this year has been a primary bearish consideration to the energy complex and as that begins to adjust lower that can be viewed as supportive,” said Tony Headrick, energy markets analyst at CHS Hedging.

^BGOS Chart

^BGOS data by YCharts

Oil ETF Trading Options

Short-term traders betting on more price movements in oil can look to ETFs like the United States 3x Oil (NYSEArca: USOU) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (NYSEArca: GUSH).

OILK seeks to provide total return through actively managed exposure to the West Texas Intermediate crude oil futures markets. The fund’s strategy seeks to outperform certain index-based strategies by actively managing the rolling of WTI crude oil futures contracts.

The fund generally will not invest directly in WTI crude oil futures. The advisor expects to gain exposure to these investments by investing a portion of its assets in the ProShares Cayman Crude Oil Strategy Portfolio, a wholly-owned subsidiary of the fund organized under the laws of the Cayman Islands.

Weakness in oil prices through the rest of 2020 could drive gains for the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (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.

Two other ETFs to play the weakness in oil:

  1. DB Crude Oil Double Short ETN (NYSEArca: DTO): offers 2x daily short leverage to the broad-based Deutsche Bank Liquid Commodity Index-Oil, making it a powerful tool for investors with a bearish short-term outlook for crude oil futures and Treasury bills.
  2. ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO): offers 2x daily short leverage to the broad-based Dow Jones-UBS Crude Oil Sub-Index, making it a powerful tool for investors with a bearish short-term outlook for crude oil.

For more market trends, visit ETF Trends.