How to Hedge Against Further Falling Oil Prices

Furthermore, many refiners also start their maintenance during this season, converting less oil and contributing to the overall demand weakness.

Oil Fall Off in Demand

The fall off in demand may have already started. Thursday’s weekly government report revealed a combined 5 million barrel rise in gasoline and distillate prices, compared to an expected 3.6 million barrel rise in processed petro products for the week ended August 31.

“If you’re in a $65-$70 range when demand is at its all-time high, what happens when demand begins to fall off?” Stephen Schork, editor of the energy trading newsletter the Schork Report, told the WSJ.

Analysts further warned that trade tensions and weak global growth could also hit oil demand while further support the U.S. dollar, which would add additional pressure on commodity prices – USD-denominated commodities like oil will be more expensive for overseas buyers.

Traders looking to hedge against further falling oil prices have plenty of ETF options, including the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO), which tries to reflect the two times inverse or -200% daily performance of WTI crude oil, and DB Crude Oil Double Short ETN (NYSEArca:DTO), which also follows a -200% performance of oil. Aggressive traders may look to the ProShares UltraPro 3x Short Crude Oil ETF (NYSEArca: OILD), which takes the -3x daily performance of the Bloomberg WTI Crude Oil Subindex, as well as the United States 3X Short Oil Fund (NYSEArca: USOD), UBS ETRACS – ProShares Daily 3x Inverse Crude ETN (NYSEArca: WTID) and VelocityShares 3x Inverse Crude (NYSEArca: DWTI).

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