The Marriage of Disruptive Tech and Oil Sector Could Yield Leveraged ETF Options

The oil and gas industry is undergoing its own renaissance with the incorporation of disruptive technology like data analytics, machine learning and artificial intelligence based on an L.E.K. Consulting report—“Best Practices in Advanced Data Science: Lessons for the Oil & Gas Industry.” This research opens up the pathway for opportunities in leveraged exchange-traded funds (ETFs).

“The oil and gas industry — which frequently operates at the cutting edge of science and engineering — stands to benefit considerably from data-driven analytics, as that can be used to both supplement existing expertise and develop new approaches,” the report said. “For unconventionals, where today’s geophysics challenges are unique to the industry (e.g., parent-child well interference and flow diversion), data-driven approaches may further expedite new advances.”

Advanced technology, however, should not be viewed as a miracle elixir to fully automate the oil and gas sector as there are certain limitations.

“Not all problems can or should be addressed using advanced analytical techniques,” the report noted. “Generally speaking, AI-driven solutions are appropriate for two broad classes of problems: 1) complex business decisions (both commercial and operational) that hinge on predictions inferred from historical data patterns, and 2) automation of commercial or operational processes with complex but discernible underlying patterns.”

In order to operate optimally, the use of AI and machine learning must have vast amount of data available at its disposal.

“AI and machine learning algorithms frequently require significant amounts of data to be effective, especially since both training and testing datasets are needed to effectively test and verify a model,” the report said. “In addition, the data must be of sufficient quality (both scrubbed and standardized) and granularity, and it must be appropriately representative of the phenomena being modeled.”

Leveraged ETF Options

Investors can looks to funds like the Robotics & AI Bull 3X ETF (NYSEArca: UBOT). UBOT seeks daily investment results equal to 300 percent of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, which is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence.

Oil plays include the United States 3x Oil (NYSEArca: USOU), ProShares UltraPro 3x Crude Oil ETF (NYSEArca: OILU) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (NYSEArca: GUSH). Traders looking to play broad energy exposure can use the  Direxion Daily Energy Bull 3X Shares (NYSEArca: ERX) for bullish plays.

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