U.S.-China trade deal negotiations fueled optimism in the capital markets last week, including oil, but prices eased early on Monday as traders await key economic data this week. The U.S., China and European Union are scheduled to release manufacturing data and other economic indicators, which could nudge oil prices higher or lower.
“Friday’s mega-rally was built on a combination of not-as-bad-as-feared data and optimism on a trade deal that really, only keeps the lights on. It does not increase the brightness of the world economy,” said Jeffrey Halley, a Singapore-based senior market analyst for Asia Pacific at OANDA. “With plenty of oil going around for everyone from everywhere, oil, in particular, will be more susceptible to headline bombs this week.”
“I think the trade talk continues to improve sentiment but … Asian oil traders want more convincing data from the macros side” before supporting oil, Stephen Innes, Asia Pacific market strategist at AxiTrader, said.
Leveraged Oil Plays to Consider
3 leveraged ETFs to consider include the following:
- VelocityShares 3x Lng 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.
- UBS ETRACS ProShares Dly 3x Lng Crud 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.
- 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).
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